Job growth fueling residential expansion in Carson City

The thrust behind a cluster of residential construction projects around Carson City appears to be job growth in the area, local development experts say.

"Carson doesn’t get the big press releases announcing hundreds of jobs, but the businesses that are here have been expanding significantly," said Aaron West, Chief Executive Officer of Nevada Builders Alliance. "With next to zero workforce housing built from 2010 to 2015, rental vacancy effectively hit zero."

There are more workers moving into Northern Nevada than there is available housing for them, West said, a problem that has received a lot of attention in Washoe County, but much less so in the Nevada state capital, where a number of projects are either under construction or on the planning docket.

"It's been difficult, because there aren't any houses for them to move into, there's no place to rent, there's no place to buy," said Carson City Supervisor Brad Bonkowski. "Getting some product to the market is going to help."

The increase in workforce is being fueled by across-the-board growth in primary industries that provide the majority of jobs in the area, said Lynn O'Mara, Director of Economic Development with the Northern Nevada Development Authority in Carson City.

"All key industry sectors in Northern Nevada are growing and adding new employees," she said.

This includes the Nevada state capital and the surrounding rural counties of Douglas, Lyon and Storey, O'Mara said.

The growth of residential construction in this four-county Sierra Region of Northern Nevada, she said, is the result of multiple factors.

The expansion of resident employers, those that are already established here, is one reason for the increase in housing projects as those organizations grow.

There are also new companies relocating or expanding their business to the area, O'Mara said.

Both of these factors have led to a substantial drop in the industrial vacancy rate — a third factor — which had been as high as 26 percent in 2010, she said, but has now reached its current low of just three percent because of the rise in job growth during that same period.

"These factors are leading to the increased need for obtainable workforce housing," O'Mara said. "Coupled with younger transplants from all over the U.S. who are filling many of the new jobs, it is putting pressure on the residential real estate market for single family and multi-family dwellings throughout the Sierra Region."

More building permits have been issued since 2016 in Carson City than there had been over an entire prior decade, according to the March Community Development Report published by the Carson City Community Development Department.

Just shy of two hundred permits were issued for single family and multi-family projects in 2016 and well over 100 were issued last year, the report said.

Many of these projects have either recently been completed or are currently under construction at this time, resulting in a cluster of building activity in the Carson City area.

But the trend is not an unusual one for the Nevada state capital, said Carson City Community Development Director Lee Plemel.

"Historically speaking, I would say that the recent increase in the number of residential units since 2016 is not an unusual 'sharp increase' in development, but more of a return to a normal pace of residential development for the City," he said. "The recession resulted in unusually slow development from 2007 through 2015."

According to the report, construction activity between 2007 and 2015 slowed to paltry levels. The most in that time was a little over 50 permits issued in both 2008 and 2010. The numbers were much lower for each of the other years during that period.

The buzzing of activity since 2016, Plemel said, is more of a return to normal from the historic lows experienced during the most recent recession.

"If you look at the historic trends, we’re really just now approaching the average pace of residential development that was occurring pre-recession," he said.

So many projects, though, seem to be popping all at once in Carson City.

"It’s taken some time to get projects spun up and so it seems like they are all hitting at once," West said.

Bonkowski agrees, adding that developers weren't able to meet their costs given market prices over the past several years. But that has been changing.

"A lot of these projects have been in the pipeline for quite a while, and developers couldn't make them pencil, so they needed to wait for housing prices to reach a certain point to where they could pay their costs and still maintain their profit margins," he said. "You would think that these projects would stretch out and spread out over time, but it never works that way. There's nothing, and then boom, everything happens at once. That is what we are seeing."

Bonkowski and Andie Wilson, owner-brokers at NAI Alliance in Carson City, said their commercial real estate business has a connection to residential construction, a relationship that has long existed but is now getting more attention.

"Commercial real estate follows rooftops," Wilson said. "You have to have the housing first. Most people think it's the other way, that you have to have the commercial first, but that's not the case."

For commercial development to expand, she said, there needs to be rooftops. And commercial growth in Carson City has been responding appropriately to the housing demand.

In fact, Wilson and Bonkowski said commercial activity began picking back up about five years ago, filling and backfilling existing empty spaces, and has recently seen an uptake in new construction to parallel the residential activity happening around the area.

"As the economy strengthens, the commercial market has continued to be strong, and we're seeing more new construction now," Bonkowski said. "We're actually seeing quite a bit of new commercial construction, and that is the connection with residential."