Washoe County Commercial Building Permit Trends

Our most recent industry index for the construction industry in the Reno MSA showed that while the index increased slightly between December 2015 and January 2016 (0.35%), it actually decreased by 5.31% compared to January of previous year.[1]  Historical graph for the construction index is shown below, showing the index declined since July 2015 with a slight increase in January 2016.

constr graph

The major reason for this decline, as shown in the table below for January 2016 is a decline in the number of commercial building permits between December 2015 and January 2016.  Both the number of commercial building permits and commercial permit valuation declined between January 2015 and 2016.

const table

The graph below shows Washoe County’s number of commercial permits issued and the value of these permits.  The data is the graph is monthly moving average (MMA) data, which means that for each month, the data is the average of that month and the 11 previous months.  Based on MMA data, the graph shows a peak in commercial building permits and permit valuation in July 2015 (consistent with the index) before falling through January 2016.  Commercial building permit data has been released for all three jurisdictions (Reno, Sparks, and Washoe County) for February 2016 showing a total of 13 building permits issued and valuation of $11.0 million.  This is greater than in terms of the number of building permits of 9 in January 2016, but lower in value compared to $15.1 million.  March 2016 commercial permit data has been released for the City of Reno only, showing 26 building permits valued at $15.2 million.  As a result, March 2016 will exceed both January and February permits data.

Comm.jpg

While of some concern, the decline in the number of commercial permits needs to be considered in its historical context.  Permit data for 2014 was at the highest level since 2008, just before the full impact of the recession in the region.  There were 240 commercial permits valued at $365.4 million issued in 2014.  In 2015, 196 permits were issued with a value of $231.9 million, representing another strong year of activity, but lower than 2014.

The total number of permits in January and February 2015 of 34 was higher than the 22 permits issued in the first two months of 2016.  However, the valuation of these permits in the first two months of 2015 was $20.5 million compared to $26.1 million in 2016.  As a result, while our late 2015 and 2016 commercial permit levels have been lower than the stellar commercial permit year we had in 2014, these levels are still the highest commercial permit activity the region experienced since 2009.  If March 2016 City of Reno activity is any indication, this activity will continue to improve.

On the residential construction front, single family permits continue their increase since the bottom in 2010-2011, with permit activity increasing in terms of both the number of permits and value of permits issued, as shown below on an MMA basis.

SF

Multi-family permit activity spiked in 2015, before declining to permit valuation levels seen during the real estate boom.  The decline in the number of permits issued is attributed to normal construction cycles of the large number of multi-family projects approved and planned for the area, not because of lack of demand for these projects.

MF.jpg

[1] Please find our economic and industry indices on our website: http://ekayconsultants.com/research.

Impacts of Proposed Tesla Gigafactory on the Reno-Sparks Region

Brian Bonnenfant from the Center of Regional Studies at the University of Nevada, Reno and I were recently asked to estimate fiscal and economic impacts of the Tesla gigafactory proposed to be built in Storey County, NV on the neighboring Reno-Sparks region.  The exact impact of the project is difficult to estimate at this point due to the early stage of the development process, the size of the project, and lack of comparable industries in the area.  Our presentation, instead, focused on existing data and areas of potential concern as the project becomes operational.

The biggest conclusion of our analysis is the large number of employees projected for the Tesla gigafactory-6,000 to 6,500 direct operating employees are projected, with approximately another 16,000 indirect employees.  The majority of these employees will reside in the Reno-Sparks area and Lyon county.

New residents will require local government services immediately upon moving to the area, while revenues generated by these residents for local governments may not be immediate.  With the benefits of increased employment, higher wages, higher home values, and additional services, we will also expect growing pains in the form of increased traffic, temporary housing price “bubble”, local government budget concerns, and employee shortages.  These are all expected to recede once the region absorbs the new residents and reach a new, larger population base.

For a full copy of the presentation, please click here: The Impact of Tesla on Reno-Sparks