Report: Commercial real estate space recovery spotty
Some commercial real estate space types are on a faster road to recovery than others, according to a third-quarter report by RCG Economics and the UNLV Lied Institute for Real Estate Studies.
Industrial space, overall, has been on the move, seeing a good recovery and it’s entering a growth mode, according to the report. But some submarkets are doing better than others.
Incubator space saw vacancy rates at 9 percent and R&D flex space was 13 percent vacancy in the third quarter.
The overall vacancy rates for the industrial market ended at 5 percent — positive for the 12th straight quarter, according to the report — and 3.6 percent less than the 2014 rates.
Net absorption was at 2.6 million square feet and asking rates fell 3 cents per square foot since the second quarter to 63 cents. The rates were still 3 cents per square foot higher than 2014.
Future development is forecast to bring 8.4 million square feet of space with 2.3 million already under construction. And 6.1 million square feet are still being planned. Warehouse and distribution makes up 91 percent of what’s under construction.
The multitenant, speculative office space market had 47,000 square feet of space added in the third quarter with vacancy rates at 21.3 percent — a three-tenths of a percent drop from the second quarter this year.
At the end of the third quarter, 218,000 square feet of speculative space was under construction and 419,600 square feet are in planning. The space under construction is mostly at Union Village in Henderson.
The market overall is still years away from making a full recovery, according to the report, which pointed to an overabundance of building during the boom as the reason for its slow recovery.
There have been some positives such as a growth in jobs that required use of office space.
There was also a positive demand in eight of the past nine quarters. There were also 200,200 square feet of net absorption in the third quarter.
Asking rates dropped 3 cents per square foot from the second quarter to $1.91 a square foot.
The anchored retail market is staying high in some parts of the valley, especially in the northeast, southwest and northwest that all had vacancy rates under 10 percent.
But some submarkets struggled.
Downtown Las Vegas had the highest vacancy rate at 18 percent, followed by the area around UNLV at 17.4 percent. West central valley had 14 percent vacancy rate and North Las Vegas was at 12.6 percent.
Overall, the vacancy rate was 11.4 percent, which is up less than 1 percent over 2014.
There was no completed construction during the quarter. And Las Vegas saw a net retail demand of 238,100 square feet for the quarter.
Residential, nonresidential growth predicted for 2016
Economists from the Associated Builders and Contractors, the American Institute of Architects and the National Association of Home Builders predicted the growth in the construction industry will continue through 2016. The prediction was made during a joint economic forecast Web conference.
“The nonresidential construction sector gained momentum over the last year and should continue to expand into 2016,” ABC Chief Economist Anirban Basu said. “The construction industry has benefited from increased stability stemming from low materials prices and greater certainty regarding federal budgeting and monetary policy, although a lack of appropriately skilled labor will remain a challenge for contractors. ABC predicts the nonresidential construction segment will experience 7 percent nominal growth in 2016.”
Home improvement spending is expected to reach an all-time high in 2015, and building in the office and retail sector will be leading the pack in 2016.
“Led by tremendous demand for energy-efficient spaces, spending on home improvements is on track to reach an all-time high by year’s end,” AIA Chief Economist, Kermit Baker said.
“The office and retail sectors are expected to lead the commercial real estate market in 2016 with near double-digit increases in construction spending expected.”
Other recovery is also expected.
“We expect the residential construction sector to continue its gradual recovery as we head into 2016,” NAHB Chief Economist David Crowe said. “Steady employment and economic growth, along with attractive mortgage rates and home prices will keep the sector on an upward trajectory as we go forward, however persistent headwinds including labor and lot shortages will continue to hinder a more robust recovery.”
New CCIM designees honored by local chapter
The Southern Nevada Certified Commercial Investment Member Chapter recognized six members for earning their credentials.
“Each designee has worked very hard and has made sacrifices to achieve the CCIM designation, which will pay off throughout their entire commercial real estate career,” chapter President Mark Macek said. “I am pleased to welcome this new group of designees into our esteemed network of CCIM real estate professionals that are consistently sought out in the industry for their competence, work ethic and analysis expertise.”
The members are Antone Brazill, principal at Brazill Real Esate in Las Vegas; C. Roger Jeffries, investment sales associate at Sun Commercial Real Estate; Paula Lea, associate at Cushman & Wakefield Commerce; Eric Molfetta, senior associate at Colliers International; Jennifer Ott, executive vice president of retail at ROI Commercial Real Estate; and Salina Ramirez, commercial agent at Commercial Executive Real Estate Services.