Industrial employment rises, but vacancy still high

While industrial employment grew by 1,400 jobs in the past 12 months, industrial vacancy in Las Vegas remained relatively high in the second quarter at 16.2 percent, RGC Economics consulting firm reported.

It's down slightly from 16.3 percent in the previous quarter and unchanged from a year ago, fluctuating no more than half a percentage point over the past two years.

"The valley's industrial real estate recession continues to move sideways," RGC principal John Restrepo said Friday. "Industrial job growth is not spiking, but it's not in huge decline either."

Net absorption, or the amount of space taken by industrial tenants, has been bouncing around the even mark for five quarters and turned positive to 84,000 square feet in the second quarter.

Based on absorption over the past 10 years, it will take at least three years before the industrial market returns to a stabilized vacancy rate of 10 percent, Restrepo said. A return to the 6 percent rate from December 2007 is a long way off, he said.

Mike Montandon, managing director of Voit Real Estate Services in Las Vegas, said brokers are still doing transactions, but most involve tenants moving around the valley, chasing lower rents.

"There's been an adjustment in the new basis," he said. "You've got a new building bought in foreclosure and a new owner in there at half the price, so he can cannibalize other buildings. We've been seeing that for a while. It's just not done yet."

Restrepo is showing average asking rents of 49 cents a square foot in the second quarter, down four cents from a year ago. Net absorption was a modest 84,000 square feet.

Projects under construction include a 51,000-square-foot light industrial building in the southwest submarket and a 49,300-square-foot distribution warehouse in the airport submarket, prompting one executive to spot an upbeat trend.

"I'm actually seeing a number of out-of-town companies taking new space," said Dan Doherty, senior vice president of Colliers International's industrial division. "They love the high unemployment and the cost of housing for midlevel management and workers' comp costs."

A lot of food companies and West Coast distributors are looking for industrial buildings, especially in the 200,000-square-foot range, all over Las Vegas, Doherty said. He now has 35 acres of industrial land in escrow near Henderson Executive Airport.

Applied Analysis business advisory firm reported a second-quarter industrial vacancy rate of 18.5 percent, up from 18.4 percent a year ago. Average asking rents fell to 51 cents a square foot from 54 cents in second quarter 2011.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.