Move To Reno: Silicon Valley’s Back Office

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Reno Wants to Be Silicon Valley’s Back Office

BloombergBusiness | Read original article

Reno, Nevada, a town that built an economy on quickie divorces, is mapping out the second act of its American life.

Faded casinos are being reborn as condominium towers. Discarded cardboard and wood — even junked cars — are being fashioned into gigantic pieces of art for the annual Burning Man festival in the nearby desert. The mayor governs the city of 233,000 with the aid of a kidney donated by her sister.

Few cities needed a second chance as much as Reno. By January 2011 unemployment was 13.9 percent, and two-thirds of homes sold that year were short sales or foreclosures. The malaise contained the seeds of the rebirth: The newly unemployed snapped up dirt-cheap real estate, spawning an artist-entrepreneur economy.

“A lot of people like us lost their jobs and started asking, ‘Now what the hell am I going to do?,’” said Eric Raydon. His answer was to go into business with two brothers buying and rebuilding properties in a gentrifying area known as Midtown. “We saw opportunities here.”

As downtowns across the U.S. revive, Reno is among cities that have a tougher task to reinvent themselves. Detroit, the largest U.S. city to go bankrupt, is repopulating downtown towers with companies such as Quicken Loans Inc., which moved from the suburbs in 2010. Atlantic City, New Jersey, battered by Superstorm Sandy and the closure of several of its casinos, wants to diversify beyond gambling and rebrand itself as a university community.

Reno is rebounding. Unemployment dropped by 1.5 percentage points in February from a year earlier, to 7 percent, according to U.S. Labor Department data. Nationally, joblessness fell by 1.2 percentage points in the period, to 5.8 percent. City sales-tax receipts are projected to rise 7.9 percent in 2015 toward the 2008 peak.
The entrance to the construction site of the Tesla Motors Inc. battery factory in McCarran, Nevada, on March 20, 2015.
The entrance to the construction site of the Tesla Motors Inc. battery factory in McCarran, Nevada, on March 20, 2015.
Photographer: David Paul Morris/Bloomberg

Located 220 miles (350 kilometers) northeast of San Francisco, in a desert valley in the shadow of the Sierra Nevada, Reno has attracted Bay Area-based Apple Inc. and Tesla Motors Inc. Apple built and expanded a data center near Reno beginning in 2013. Tesla plans to begin making lithium-ion batteries at its Reno “Gigafactory” in 2017.

In addition to the brand-name companies, Reno is incubating startups such as TrainerRoad, which has developed a software application for aspiring triathletes, and EasyKeeper, a Web-based app for managing herds of goats. The city has designated a strip of downtown as “Startup Row,” with offices looking out to snow-covered mountains and the Truckee River.

In interviews, entrepreneurs said they were drawn by cheaper real estate, outdoor recreation near Lake Tahoe and a comparatively laid-back, we’re-in-it-together business culture.

Downtown office rents averaged $1.61 a square foot in the last three months of 2014, compared with $5.27 in the overall San Francisco market, according to CBRE Group Inc., a Los Angeles-based commercial-property company.

“It’s cool to be here right now,” said James Elste, who founded Inqiri, a crowdsourcing platform for businesses, in 2012. “It’s got that ‘things are happening’ feel to it. Being in Silicon Valley or Austin, you get the sense that things already happened.”
Artist Michelle O’Kane works on a wood sculpture at the artist co-op The Generator.
Artist Michelle O’Kane works on a wood sculpture at the artist co-op The Generator.
Photographer: David Paul Morris/Bloomberg

Just south of downtown, Midtown epitomizes the treasure-from-trash culture: The stores sell recycled furniture, records and clothing; old homes — snapped up by the Raydon brothers and others at recessionary prices — have been refurbished and rented out.

Mayor Hillary Schieve founded a pair of used clothing stores in Midtown in 2007 when, she recalled, the neighborhood was blighted. It was a second act for the 44-year-old Schieve following a figure-skating career cut short by kidney failure. Schieve received a transplant from her sister and later wagered that during a recession, shoppers would be in the market for affordable secondhand clothing.

“We couldn’t have done something like that during a flourishing economy,” Schieve recalled.

Near the techies and the hipsters are elements of Reno that have stubbornly refused to buy into the new vision.

Downtown remains a hodgepodge of souvenir shops peddling $10 T-shirts, casinos advertising steak dinners for $9.99, pawnshops and payday lenders.

Nearby, the Morris Burner Hotel is a year-round haven of Burners, the term for attendees of the annual Burning Man arts and self-expression festival in the Black Rock Desert, with rooms painted in psychedelic colors and giant sculptures outside. It’s one representation of how the festival’s culture has grown since 1990, when the event drew 90 people from its former home in San Francisco. Now Burning Man, named for the burning of a large wooden effigy, attracts more than 65,000 people, including corporate chiefs such as Tesla’s Elon Musk and Virgin Group Ltd.’s Richard Branson.
The Morris Burner Hotel in Reno.
The Morris Burner Hotel in Reno.
Photographer: David Paul Morris/Bloomberg

Much of the festival’s art originates locally, from people like Matt Schultz, who lost his job as a video-production manager in 2009 and visited Burning Man for the first time that year. Inspired by the experience and travel across Asia and Africa, the 35-year-old has designed a giant wooden sculpture of two people embracing, a shipwrecked Spanish galleon and a fishing pier extending over the desert floor.

Next to businesses catering to Burners and urban bicyclists, hundreds of homeless line up for meals at the Reno-Sparks Gospel Mission.

One of them is Bob Haney, 61, who drove a taxi in Reno for 25 years until, he said, his license expired seven years ago.

“I’ve seen the old Reno when it was a town to come to,” Haney said. “I love this city, but people need to market it more. Half of the casinos are condominiums now.”

Reno’s casinos made less money in 2014 than they did in 1993, as the city fell to the 16th-largest U.S. gambling market by 2012 amid competition from Indian-owned casinos.

Founded in 1868 as a stop on the Transcontinental Railroad, Reno boomed in the 1930s after the state legalized gambling and the nation’s most liberal divorce laws drew unhappy couples. At the time, Reno was Nevada’s largest city; Las Vegas didn’t catch up until the 1950s. Reno now ranks third behind Sin City and one of its suburbs, Henderson.

As Reno faded, its leaders turned to bowling, balloon races and rodeos to revive its fortunes. Its latest attempt at reinvention holds more promise, as high costs and regulations in the Bay Area play to Nevada’s strength as a lightly regulated frontier state, said Chris Baum, president and chief executive of the Reno-Sparks Convention & Visitors Authority.

“The world changes,” Baum said. “And you have to change with it.”