Local industrial market continues lateral pattern


The industrial real estate recession continues to move sideways in Las Vegas, with 16.2 percent vacancy in the fourth quarter, John Restrepo of RCG Economics said.

It will take at least three years before the industrial market returns to a stabilized vacancy rate of 10 percent, based on quarterly absorption over the last 10 years, he said.

The market recorded 64,000 square feet of positive absorption during the fourth quarter, or more space taken than vacated. For the year, net absorption was 85,000 square feet.

"While we don't recommend looking at quarter-to-quarter changes, trends indicate a moderately improving industrial market since the depths of the recession in second quarter 2009, when the market experienced 1 million square feet of negative absorption," Restrepo said.

Dean Willmore, industrial broker at Colliers International in Las Vegas, said vacancy will remain relatively high, even with increased absorption and minimal new construction.

"More owner-occupied properties are being bought and put on the market for lease, so it's kind of like pouring sand in a bucket with a hole in it," Willmore said. "We keep filling up space, but there's more space coming up for lease."

Colliers showed 15 percent industrial vacancy in the fourth quarter, 0.2 percentage points higher than the previous quarter and 0.3 points higher than a year ago.

Industrial leasing activity has been strong and the vacancy rate will slowly drop, maybe by 100 to 150 basis points, Willmore said.

"I do believe we found the bottom in pricing. We're up 15 percent on sales prices. However, lease rates have remained stagnant or gone down," he said.

Average asking rent for industrial space now stands at 48 cents a square foot on a triple-net basis, not including common area maintenance and janitorial costs. It's the same as the third quarter and down 3 cents from a year ago.

There were no industrial completions for the second straight quarter. Much of the market activity is lateral, Colliers research director Matt Stater said. Tenants are looking for less space, cheaper space or better location, he said.

Willmore recently leased 71,000 square feet in North Las Vegas to Updike Distribution Logistics, a Phoenix-based distributor with Anheuser-Busch, Coca-Cola and Kroger Foods as clients.

The company has 2.1 million square feet of warehouse space in Arizona, California and Nevada, and expects to expand in Las Vegas, Willmore said. The company runs about 50 trucks a day here.

<b>98 OFFERS</b>

Competition for the limited number of homes available for sale in Las Vegas isn't healthy for the market and is quashing the American dream, a real estate agent said.

A house listed for &#036;126,900 at 9826 Travis Lake Court drew 98 offers and there's nothing special about it, said Dani Smith of Keller Williams Southern Nevada. That means 98 buyers will be rejected.

&quot;I have first-time homebuyers that are beyond frustrated because by the time we view the property on the first to third day that it is listed, it is either already in contingent status or it has 10-plus offers,&quot; she said. &quot;There are many vacant homes that aren't being sold because they aren't being listed. This situation is destroying our market unnecessarily. We are experiencing the boom all over again in a distressed market. It's just completely ridiculous and infuriating.&quot;

<b>LOFT RENTALS</b>

John Tippins of Northcap Advisors has added the Modern, formerly Luxe Lofts, at 8925 W. Flamingo Road to his portfolio of distressed condominium rental properties. He's also leasing the Ogden, Juhl, Loft 5 and One Las Vegas, all casualties of the real estate bust in Las Vegas.

The Modern will be marketed as a boutique luxury rental with a bit of intimacy, he said. Amenities include a large pool and spa, fitness center, fire pits and courtyard.

The three-story, 83-unit development was purchased by Los Angeles-based BondRok Partners in May 2011 for &#036;6.75 million. The company spent about &#036;6 million on renovations and held a grand opening in April. Prices ranged from the &#036;200,000s for a 1,200-square-foot, one-bedroom unit to &#036;450,000 for a 2,500-square-foot, three-bedroom unit.

Construction on Luxe Lofts was halted in 2009 when developer Frank Hamadani filed for Chapter 11 bankruptcy. The project's estimated construction cost was &#036;38 million.

<b>HOUSING STARTS</b>

A report from Portland Cement Association projects U.S. housing starts to reach 954,000 this year, building upon nearly 30 percent growth in 2012. Even stronger growth is predicted for 2014 with starts surpassing 1.1 million.

Economists are revising nearly a decade of pessimism and forecasting growth throughout the residential construction industry.

&quot;The possibility of 1 million starts in 2013 should not be dismissed,&quot; association chief economist Ed Sullivan said. &quot;Although the first half 2013 will be mired in a fiscal cliff hangover, we are decidedly optimistic about second-half economic growth, job creation and consumer sentiment, all of which translate into stronger home sales and starts activity.&quot;

Las Vegas-based Home Builders Research counted 5,908 new-home permits in 2012, up 58 percent from the previous year. New-home sales increased 42 percent to 5,544 closings last year.

The association expects multifamily construction to grow 15 percent to 277,000 units in 2013, following 36 percent growth in 2012. Damaged credit from foreclosures and tight mortgage lending standards have combined to create robust apartment demand, Sullivan said.

Contact reporter Hubble Smith at <a href="mailto:hsmith@reviewjournal.com">hsmith@reviewjournal.com</a> or 702-383-0491.

 

 

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