Reno's Efforts to Improve Its Image
Catch the Attention of Investors

Reno, some 450 miles northwest of Las Vegas, is finally shaking its image as the blue-collar stepsister to the glitzier Nevada gambling capital.

Efforts to diversify beyond the city's storied slot-machine past have caught the attention of a variety of real-estate investors. Projects, estimated at $390 million, to convert some of Reno's older casinos into 1,119 mostly high-end condominium units are either completed or under way, according to the Reno Redevelopment Agency. A $282 million project lowered 2.3 miles of railroad track below street level to allow overpasses and reduce congestion and pollution downtown, opening new areas for development. A $1.5 million whitewater park for kayaking and rafting opened on the Truckee River just blocks from casinos that line Reno's main drag, Virginia Street.

"A lot of people just think it's an old washed-up gambling town ... . It so isn't," says Celeste Eisenberg, a spokeswoman for the Economic Development Authority of Western Nevada. The transformation grew in part out of adversity. The area's gaming industry was hit by the '80s recession, the tech bust and the downturn in travel after the Sept. 11, 2001, terrorists attacks. Located in a valley just east of the Sierra Nevada mountains, Reno also has been working to fend off increased competition from Indian casinos in California by promoting its outdoor recreation offerings.

Tourism and gaming remain important, but construction, professional business services and such companies as technology giant Microsoft Corp. helped boost the area's job growth by 5.8% in February from the year earlier, well above the 1.5% national rate, according to the Bureau of Labor Statistics. Population for the Reno region that includes Washoe and Storey counties rose 14.9% from 2000 through last year to nearly 400,000, a pace well above the nation's 5.3% rise, according to the U.S. Census Bureau.

Job and population growth triggered a recovery in the commercial market, led by the industrial sector. Warehouse distribution space, which benefits from the region's central location in the western U.S., boasts vacancy rates not seen in a decade, says Paul Perkins, a senior vice president of industrial properties with Alliance Commercial Real Estate Services LLC in Reno. Among the area's recent wins: an 880,000-square-foot Wal-Mart Stores Inc. distribution center in the Tahoe-Reno Industrial Center to deliver groceries to Western states.

Retail developers are rushing to meet increased demand from new residents. An estimated 2.5 million square feet of new space was either recently added or is being added over the next three years to the region's existing 12 million square feet, says Kelly Bland, senior vice president of retail at Alliance. Last month the high-end Summit Sierra outdoor mall, which is about 663,000 square feet, opened along the highway that leads to Lake Tahoe, bringing stores such as Banana Republic to the region for the first time.

Jeffrey Bayer, chief executive of Birmingham, Ala.-based Bayer Properties LLC -- the developer of the Summit Sierra -- says he had to work hard to convince retailers to give the new Reno a chance. "There's booming growth and nowhere for people to go and hang out and spend their money," says Mr. Bayer.

Many real-estate investors are betting that Reno's need for more places to shop, work and live can only expand with the arrival of more and more Californians, drawn by Nevada's lack of a personal and corporate income tax and comparatively cheaper housing. Fourth-quarter median home prices in the Washoe County area that includes Reno were $320,000, just below the $380,900 of nearby Sacramento and significantly below the San Francisco region's median of $718,700, according to the Northern Nevada Regional MLS and the National Association of Realtors.

Last year Basin Street Properties in Petaluma, Calif., purchased the former Bank of America Plaza, an office property now known as 50 West Liberty in downtown Reno, for $34.6 million. Company vice president Scott Stranzl believes the public and private investment in the urban core makes downtown a good bet.

Email your comments to rjeditor@dowjones.com.