Some of Las Vegas’ commercial real estate sectors are on the verge, or have experienced, major positive shifts through 2018, a trend that could continue.
The valley’s office market is on the cusp of a potential development pipeline that could bring up to 1.5 million square feet of new office space to the area with vacancies continuing to fall in existing product. On the industrial spectrum, developers remain interested in the valley with new product types starting to enter the area; sales volume for industrial is also heating up in the local market.
Chris Beets, a director in Newmark Knight Frank’s industrial services division, said sales volumes in Las Vegas’ industrial sector have already matched 2017’s annual numbers through the third quarter of 2018.
Beets said he is seeing companies expanding to the Las Vegas Valley. Sephora is developing more than 700,000 square feet of warehouse-distribution space in North Las Vegas, and other companies such as CVS (Caremark) have moved here.
The NAIOP Southern Nevada’s annual bus tour featured 42 projects from industrial, office and retail, along with mixed-used developments, across the valley. The tour features projects that have been completed and others slated to open in 2019.
Some major projects for the coming year include Prologis’ Interstate 15 Speedway Logistics Center II, which is set to add more than 1 million square feet of space by the third quarter of 2019, across three buildings. Prologis is looking to complete a second project in the center in 2019.
Colliers International Las Vegas is tracking more than 6.9 million square feet of industrial space that could potentially come online through the first two quarters of 2019, which also includes development in the fourth quarter of 2018.
Global Logistic Properties acquired two industrial buildings totalling more than 1.3 million square feet of space in the Northgate Distribution Center in North Las Vegas at the end of 2017. That transaction was valued at more than $125 million.
According to data from Colliers International Las Vegas’ third quarter industrial report, the firm had tracked a sales volume for the sector of $536.2 million through the third quarter of 2018, beating out the annual sales volume of each year from 2014-2017. Prior years were not available in the report, though it was noted that 2018, thus far, has seen the largest sales volume in the industrial sector since the boom era prior to The Great Recession.
“We’re seeing a combination of institutional buyers that are purchasing large distribution centers and developing new developments,” Beets said.
Also, on the development side of the industrial market, there has been an increase in midbay industrial product, which has square footage smaller than the big box projects, according to Beets.
Beets said developers have not been able to pencil these projects over the last couple of years because of the higher construction costs, but that’s starting to change.
Vacancy rates improved in the third quarter, according to a report from Newmark Knight Frank. Rates sat at 5.4 percent in the third quarter, down from 6 percent in the second quarter. That was also lower than the third quarter of 2017 when Newmark was tracking 7.1 percent vacancy.
Valleywide asking rents sat at 63 cents in the third quarter of 2018, up from 61 cents a year earlier.
The development pipeline in the office market is also something of note by area commercial real estate experts.
Mike Tabeek, managing director at Newmark Knight Frank’s Las Vegas office, SIOR, CCIM, said the potential pipeline of projects could bring up to 1.5 million square feet of new office space to the Las Vegas Valley in the next 24 to 30 months along the 215 Beltway, in the southwest to Summerlin.
Tabeek said Two Summerlin, a 152,300-square-foot, six-story Class A office tower, is nearly 100 percent leased and that Summerlin could be on the cusp of seeing more office developments by Howard Hughes Corp.
The office market has seen a lot of improvement since the recession with vacancies falling to 14.5 percent, according to data from Tabeek. That was down from a recession high of 27 percent after 21 months of positive absorption.
Tabeek said the 14.5 percent vacancy rate was valleywide. But along 215 Beltway, rates were more in the single digits for vacancy.