Historically, the U.S. state of Nevada didn’t do very well in the Great Recession. As well as being the leader in unemployment, it came number one back in 2012 as the state with the highest number of foreclosures and the highest number of negative equity homes. The northern city of Reno, far away from the glitz and glamour of Las Vegas, fared worse than the state average.
But ever since Tesla Motors announced the Tahoe Reno Industrial Park to the east side of the The Biggest Little City in the World, Reno has enjoyed a massive upturn in its fortunes with an inrush of construction jobs and associated businesses as Tesla builds the largest electric car lithium-ion battery manufacturing and reprocessing facility the world has ever seen.
Even with the Tesla Gigafactory more than a year from completion, the housing market is heating up, say real estate professionals, with many homes finally clawing out of negative equity, into profit and beyond. It’s a phenomenon that the local Reno Gazette jokingly calls ‘The Tesla Touch.’
The Tesla Gigafactory is expected to cover more than 1,000 acres and employ more than 6,500 locals. Estimated build costs come in somewhere between $5 and $6 billion, with Tesla footing the majority of the bill and partner Panasonic rumoured to have $1 billion invested too. Combined with more than $1.25 billion in tax breaks from the state of Nevada, the Gigafactory represents the kind of investment in the region that few had dreamed of, representing an estimated $100 billion overall benefit to the local economy over the next twenty years.
Its job? To manufacture and reprocess more than 35 gigawatt-hours of high-performance, automotive-grade lithium-ion battery cells every year. Built by Tesla to enable it to dramatically lower the cost of producing electric car lithium-ion battery packs, the Gigafactory is expected to open some time next year in order to enable Tesla to bring its promised $35,000, 200-mile, mass-market 2017 Tesla Model ≡ car to production.
With such a tight time frame, the Gigafactory site is one of the biggest construction sites we’ve ever seen, employing hundreds of locals to build the facility at breathtaking speed.
It’s no surprise that real estate in the nearby area really is enjoying a surge in demand, with demand currently far outstripping supply.
Writing what is essentially an advertorial guest post at Teslarati real estate professional Candy Noel from Reno Sparks Tahoe Homes says that there’s a noticeable upward trend in the housing market, with many homes finally at break-even point when it comes to buying versus building homes.
A quick check on real estate site Zillow shows that house prices in Sparks, the nearest town to the Gigafactory, have risen steadily since Tesla confirmed the Gigafactory as its chosen site. What’s more, the number of foreclosed homes have dramatically dropped as more and more locals find employment directly or indirectly as a consequence of the Gigafactory.
Of course, it’s still early day, but Noel says there’s still a low resale inventory of around 2.6 months of homes rather than the 6 months of homes considered the healthy norm. In other words, demand for new housing is far higher than the number of homes for sale. And in a market where demand is high and supply is low, prices only go one way: up.
Alongside the rises in the value of conventional single-family homes however, the real winners in Reno’s real estate boom are those with multi-family dwellings or land near to the Gigafactory site. With a local hotel already due to be erected in the same industrial estate as the factory itself, local land is exchanging hands for extremely high figures.
“I have $5 million and I want an apartment complex near Tesla,” one investor demanded of Noel recently. Back in august, a 296-unit apartment complex in Reno sold for $27.5 million, while another 265-unit luxury ‘garden-style’ complex of Villas sold for $32 million in December.
So far the real estate price rises in Reno are undoubtedly a good thing. But as residents of San Francisco can attest to, too much of a price hike can gentrify neighbourhoods, drive out locals, and create an inequitable housing market for everyday residents who have lived in the area all their lives.
Let’s hope that part doesn’t happen, and Reno continues to benefit from only the positive side effects of Tesla’s presence.
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