Industrial real estate’s vacancy rate treads water

The industrial real estate sector continues to tread water in Las Vegas with a vacancy rate of 16.2 percent in the third quarter, a slight decrease from a year ago, but 2 percentage points higher than third quarter 2009, RCG Economics reported.

It will be a "long haul" to get back to the 6 percent industrial vacancy prior to the recession, said John Restrepo, principal of the Las Vegas economics consultant firm.

The market recorded only 43,600 square feet of net absorption, or space taken by industrial tenants, with no projects completed during the third quarter and 181,100 square feet under construction, RCG showed.

The bulk of that construction is a 130,000-square-foot computer recycling center being built for U.S. Micro Corp. in southwest Las Vegas Valley.

Industrial inventory exceeds 107 million square-feet in Las Vegas, so small increases in supply are essential to a healthy supply-demand balance, Restrepo said.

"Mostly we see owner-occupants taking advantage of low prices here and taking bigger space or moving from a rental to an ownership situation because of low interest rates," the economic analyst said Thursday. "There's a lot of internal growth, which is good."

Average monthly asking rent for industrial space fell to 52 cents a square-foot during the quarter, down from 56 cents a year ago.

Las Vegas' industrial market has posted positive net absorption in four of the last five quarters, following eight consecutive quarters of negative absorption, Restrepo noted.

The only product type to see negative absorption was light distribution, which gave up 139,000 square-feet, not enough offset the gains made in other types such as research and development, warehouse distribution, and incubator space for startup businesses.

Colliers International put the third-quarter industrial vacancy rate at 15.4 percent, the same as a year ago, with average rent of 52 cents a square-foot.

The commercial real estate brokerage showed 72,335 square feet of negative absorption in the quarter, not as dramatic as previous quarters, but a long way from prerecession levels, said John Stater, research director for Colliers.

"Performance in the third quarter hopped back over to the negative side of the line, and though it was a mild setback compared to what we saw in 2008, it does illustrate the serious problems still facing the local economy," Stater said.

Las Vegas-based Applied Analysis showed 18 percent vacancy for 104.2 million square-feet of industrial space, a slight improvement from 18.2 percent vacancy in the second quarter, but up from 16.4 percent a year ago.

The current vacancy rate is nearly double its 10-year historical average. It would take about 12 million square feet of positive absorption to bring vacancy back to pre-recession levels.

"Market dynamics have changed, which will have the recovery cycle look much different than historical periods of expansion," Applied Analysis senior manager Alyson Bettelman said. "Finding opportunities in areas that are moving in a positive direction will be important. Aligning those opportunities with an ailing industrial market remains an even bigger challenge."

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