The Las Vegas industrial market kept its bull market status at the tail end of 2015, following a nationwide trend, according to a fourth quarter report.
Cushman & Wakefield, a global provider of commercial real estate services, found local vacancy rates dropping over a percentage point — 6.8 percent from 7.9 percent in 2014 — in a year-over-year analysis. This number puts the Valley ahead of historic lows on the national level.
But national level vacancy in the industrial sector is also hitting new lows. U.S. vacancy rates dropped to a 15-year low in the fourth quarter of 2015, with heavy gains in net absorption—some of the strongest on record. The U.S. industrial market for 2015 hit 238.6 million square feet in net absorption. National vacancy fell 80 base points from the fourth quarter of 2014 to 7.2 percent. This puts it 220 base points below the historical average of 9.4 percent, according to the report.
Las Vegas was also a leader in another sector: rental rate growth. It placed fifth behind various Southern California markets and Pittsburg. The Valley’s rental rates grew by 11 percent, just behind the Inland Empire’s 11.2 percent. The Los Angeles market was just ahead at 11.4 percent. San Diego had the largest growth in rental rates—19 percent. And Pittsburg was just behind that at 17.9 percent growth. The sector as a whole saw a rise in rental rates from the fourth quarter of 2014 over the 2015 fourth quarter in 60 of the 79 markets reported on by Cushman.
The start of the year did come out with a rocky start, but the sector looks to be geared up for more growth.
Kevin Thorpe, Cushman & Wakefield’s chief economist, said despite a volatile beginning of the year, along with negative economic factors, the outlook for the industrial sector remains positive.
“We didn’t exactly have the start to the year we were looking for with the volatility in the Chinese equity markets spilling over to the U.S. and the DJIA dropping by nearly 5 percent in the first week of trading,” Thorpe said. “On top of that, the industrial sector does face significant headwinds going into 2016 related to the stronger U.S. dollar and slowing global growth. The core of the U.S. remains solid enough to weather the storm, but demand for industrial space is expected to cool down this year.”
Jason Tolliver, head of Cushman’s industrial research sector, Americas, agreed with a one-year hot streak in the sector on the national scene.
“Based on active tenant requirements – an indicator of future leasing velocity – there is a robust pipeline of pent-up demand,” said Tolliver. “With current and projected demand from active tenant requirements double the amount of speculative construction now under way, demand will likely exceed supply for at least one more year as domestic fundamentals and industrial occupancy drivers remain strong.”
UNLV purchases 42 acres
UNLV purchased a 42-acre land parcel near Tropicana Avenue and Koval Lane earlier this month. The deal could lead to a possible stadium on the now empty lot, though no short term plans for such a venture are in discussion.
According to UNLV officials, the $50-million purchase was to help fulfill its long-term strategic needs.
“We have some short term uses planned for this 42 acres, but it is likely any permanent development is years out into the future,” said Gerry Bomotti, senior vice president for finance and business at UNLV. “However, we will continue to explore the possibility of monetizing some of the land along Tropicana to help fund university development on that property, as well as serve the users of that property.”
The possibility of any stadium, if and when it happens, would also not be financed by the university. It would be left to an outside entity, officials said.
Some of UNLV’s other possible plans in the distance, discussed during the last Nevada Board of Regents meeting, includes an option that would lend support to graduate and other academic programs for the campus. It also included the possibility of clinic activities that would serve the Las Vegas community. UNLV leaders dubbed this the “Campus Village” option.
Other options, part of the campus village and stadium plans, assumed that pads along Tropicana would be used for commercial development—mainly with food and beverage options.
Downtown multifamily project begins
Korte Co. has begun construction on a mixed-use multifamily project at the corner of Ninth Street and Fremont Street. The five-story, 231-unit project will sit on 1.3 acres and is a partnership with 901 Fremont, LLC, an affiliate of Downtown Project, and The Wolff Co.
The project will also include 15,000 square feet of retail space that sits along Fremont Street.
According to Tony Hsieh, Zappos owner, “Increasing the residential density is key to making the Fremont East area a truly vibrant place to live, work, and play. We’re excited to see this development for those who want to live downtown.”