Reno developer: Interest rates, not election, key to real estate slowdown

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Things are kind of slow right now in the development and real estate industries, Par Tolles, CEO of Tolles Development of Reno, said recently on Nevada Newsmakers.

Conventional wisdom would say it has to do with anxious anticipation over the upcoming election.

"Everybody says that," Tolles told host Sam Shad.

However, other factors are more important.

"I think it's interest rates," Tolles said.

The Federal Reserve cut its key Federal Funds Rate in September, trimmed it to a range of 4.75 percent to 5 percent from 5.25 percent to 5.5 percent, according to business news websites.

It was its first rate cut since 2020 during the COVID-19 pandemic. Multiple published reports also mention the possibility of two more cuts before the end of the year.

"You just had a cut, and so a lot of businesses are waiting, (saying) 'When do we take on debt that's going to allow us to grow? 'And we know there's two more interest rates (cuts) coming," Tolles said. "At least that's the prognostication right now. So I think more than anything, it's more of 'economic waiting.'"

Tolles questioned the historic implications of elections and real estate.

"Everybody always puts it (slowdown) on the election but from a real estate standpoint, if you look at the last 20 years, there's been no meaningful changes in real estate because of an election year."

Yet some businesses can be significantly impacted by an election, he added.

"For certain companies, if there's legislation, maybe about environmental issues, and if companies think that if one side gets elected it is going to promote their sector, then maybe they'll wait.

"So maybe for some companies there is (an election factor), but I think it's more of the economic reasons," Tolles said.

Business for Tolles, however has not been slow. He spoke of four Tolles Development projects – three in Reno and one in Southern Nevada – that have hit significant milestones. Logistics and location will be an advantage for all. Consider:

HYATT SOUTH RENO: The 132-room Hyatt Place South Reno opened earlier this month near the Summit Mall on the Mt. Rose Highway. It's location will appeal to recreational and business travelers.

"It is the southernmost hotel in Reno, so closest to Carson City and it's the hotel closest to Lake Tahoe," Tolles said. "So from a business travel standpoint, it'll be a great hotel because you have all the amenities of the Summit Mall, restaurants, Apple Store, etc., and then will be a refugee hotel, I think, for Lake Tahoe. As you know, Lake Tahoe has gotten so expensive.

"It's just really hard for the middle class to enjoy it. So we'll be 25 minutes from Incline (Village), if that."

The recent opening caps a four-year journey from start-to-finish for the Hyatt Project, Tolles said.

"For those not familiar, we started the hotel before COVID, and a week after we broke ground, I got very nervous," Tolles said. "I had, GFC (Global Financial Crisis disorder), probably, PTSD (Post-traumatic stress disorder). It's a lot of in acronyms, but we shut it down. So we waited until after COVID ended, and then we started back up."

AIRWAYS COMMERCE CENTER: Tolles' 900,000-square-foot employment hub with space for offices, warehousing distribution, light manufacturing and showrooms, is leasing.

"I would call it the best located industrial park in the city," Tolles said.

The Airway Commerce Center is located in the former Home Gardens area just south of the airport, according the Reno Gazette Journal. Tolles will be leasing the land from the Reno-Tahoe Airport Authority.

"We worked really well with the airport and just completed it," Tolles said. "And it's in the lease-up stage. So leasing is a little slow. Across the country it's slow. We've got about 20 percent of it leased so far and we've got some good tenants in tow.

"It's well positioned, it's attractive, it's great for overnight-type logistics," he said. "And, you couldn't build anything else there because of its proximity to the runway. We had population restrictions and height restrictions. Everything goes along with airport development and we found the right time to partner with the airport to build it."

UNIVERSITY CROSSING: Tolles said his company recently completed an 8,000 square-foot building in downtown Reno next to The Row, which is six contiguous downtown Reno city blocks, uniting the Eldorado Resort Casino, Circus Circus Reno and Silver Legacy Resort Casino. It was quickly leased to four restaurants to serve a growing student market as the University of Nevada continues to expand into the downtown corridor.

"We will be able to serve the university, more fast food, Jimmy John's, Teriyaki Madness, etc. But it showed me that there's a demand for downtown. And as the university continues to creep over (Interstate) 80, I think it's going to continue to push for redevelopment downtown."

JEAN WAREHOUSE, DISTRIBUTION CENTER: Perhaps Tolles' biggest project is the construction of a 1.9 million-square-foot warehouse and distribution center near the small Southern Nevada border town of Jean. Construction of the first building there will begin in November.

"We think we've got a tiger by the tail," Tolles said during a 2023 Nevada Newsmakers interview.

The land is 34 miles from the Las Vegas Strip and 13 miles from the border with California. It has built-in infrastructure from the old Gold Strike hotel-casino and the potential to become an ideal spot for shipping, receiving, manufacturing and storing products and cargo of all kinds. A rail line and interstate run next to it and Jean has a small airport.

"We'll be – by far – the southernmost industrial submarket in Las Vegas," he said. "And I repeat myself: This allows a truck to go in from the port of Long Beach to Jean and go around and turn around and go back same day. So (this will help lessen) all the congestion of truck traffic that goes down I-15 next to The Strip, on their way to North Las Vegas."

Tolles was referring to truckers' rule of driving a maximum of 11 hours in a 24-hour stretch, followed by 10 hours rest. By dropping off cargo at Jean, truck drivers can turn around and go back home, instead of putting up with the mandatory night's rest in the Las Vegas area before the return trip is allowed.

"Our thesis has been, if we can build a substantial submarket that can attract rail and Union Pacific's excited about our project. The rail runs right through the middle of it. And if we can get the surface traffic, the truck traffic to come to Jean and not have to go all the way to North Las Vegas, then from an environmental standpoint, from a congestion standpoint, we will serve the market well."

Tolles sees the Jean property as a way to help diversify the Las Vegas economy, which is now heavily dependent on tourism and gaming.

"We want to continue to diversify Las Vegas," he said. "You can see manufacturing numbers and skilled manufacturing is up in Vegas. I think 25 percent is still gaming, but there's a lot of other. And I'm very excited about the diversification of Las Vegas. And I think we can really facilitate that, from the edge of Las Vegas all the way to the state line."