A report released by Xceligent and the Commercial Alliance Las Vegas (CALV) shows the office, industrial and retail sectors of the commercial real estate market in Southern Nevada all continued to gain ground during the second quarter of 2016.
“The strengthening of our market is continuing as anticipated,” said 2016 CALV President Soozi Jones Walker, a longtime local commercial real estate broker. “The market continues to absorb the additional industrial space being delivered, but we’re still seeing office space absorption lag behind industrial and retail vacancy rates.”
Walker said fewer building owners are offering concessions to attract tenants to their local properties.
According to the latest quarterly report from Xceligent and CALV, the local industrial market absorbed 401,528 square feet of space during the second quarter of 2016 to maintain a total vacancy rate of 6.0 percent, matching the first quarter vacancy rate. Through the first half of 2016, the local industrial market has absorbed nearly 1.3 million square feet. Even with the industrial space that is being built or recently completed, Walker said demand for such space could exceed the available supply by the end of 2016.
“The industrial sector continues to see gains in both inventory and absorption, and a good portion of new deliveries continues to be pre-leased,” said Tina Reith, director of analytics for Xceligent in the Las Vegas market. “It will be great to see what new projects are erected in the northeastern and southwestern portion of the Las Vegas area once construction is complete for a number of buildings that are scheduled to be delivered in the third quarter. We’ve seen nothing but positive activity in the local industrial sector from the time we launched our dataset here at Xceligent.”
The local retail market also progressed during the second quarter, absorbing 459,528 square feet of space and seeing its overall vacancy rate drop to 7.8 percent. At the same time, Walker said retail lease rates have been increasing over the past year or so.
“The retail market closed out the second quarter with more net absorption being reported than over the last eight recorded quarters,” Reith added. “The market is still making a comeback from the negative absorption that we saw in 2014, even after having new deliveries added to the local inventory, such as the IKEA on the southwest side of the metro area.”
Second quarter retail highlights included IKEA opening its first Nevada location near Sunset Road and the 215 Beltway on May 18, marking the largest single store of any kind in the state. Walker expects retail momentum to continue this year, when popular restaurant chains like Cracker Barrel, Dave &Buster’s and Chick-fil-A plan to open their first Southern Nevada locations.
In the office market, Walker said vacancy rates dropped again to 18.1 percent in the second quarter but remained higher than historic norms. The office market absorbed more than 68,000 square feet in the second quarter, absorbing less space than during the first quarter. The local office market has been the slowest sector to recover from the economic downturn, though Walker said she is seeing more businesses leasing office space in central areas of Las Vegas as lease rates continue to rise for newer space in suburban areas.
“While it may seem that the office sector is slow to recover, we’ve seen positive absorption for the market throughout 2015, and the trend has continued through the second quarter of 2016,” Reith explained.
To access the full reports, visit www.calv.org.