Industrial sector sees activity

Several major industrial transactions drove third-quarter net absorption into positive territory for the first time in a year, commercial brokerage Grubb & Ellis reported.

Overall vacancy dropped slightly to 15.6 percent for 99.4 million square feet of industrial space in the Las Vegas Valley.

During the quarter, Marnell Properties opened a 200,000-square-foot air cargo center at McCarran International Airport, Amonix leased 214,000 square feet for a solar power system manufacturing plant in North Las Vegas and Czarnowski took 214,000 square feet for its convention display service, also in North Las Vegas.

The numbers may be a "blip on a radar screen during a thunderstorm," but they do show some activity happening in Las Vegas, Grubb & Ellis research manager Dave Dworkin said.

"There's so much going on out there, deals with banks and deals with special foreclosures, it's truly hard to gauge right now," Dworkin said. "There's such a dynamic range of prices. Until we get some stabilization in pricing, you're not going to see the bottom for recovery."

Leasing trends over the past two years have been fairly similar, he said. There were some 170 lease transactions totaling 2.25 million square feet through the first three quarters of this year, compared with 176 transactions for 1.67 million square feet in the year-ago period.

Industrial leasing activity in Las Vegas certainly hasn't faltered and it's feasible that absorption may stay positive going into 2011, Dworkin said.

"It's good to see some positive action," he said. "Not only that, but it's significant space for each building and even more noteworthy is one of the companies (Amonix) is from out of town. It's not all doom and gloom in Las Vegas."

Business advisory firm Applied Analysis showed industrial vacancy at 16.6 percent in the third quarter, compared with 16.2 percent in the previous quarter and 13.1 percent a year ago. Average asking rent was 57 a square foot per month, down 1 cent from the second quarter and down 11 cents from third quarter 2009.

Average rents continue to be affected by the mix of property types and availability of space within each category. Flexible industrial space, which can be used for different purposes, is the highest at 76 cents a square foot, followed by manufacturing at 60 cents a foot and distribution at 49 cents a foot.

Applied Analysis showed negative 38,000 square feet of net absorption in the third quarter and nearly 3 million square feet of negative net absorption in the trailing 12-month period.

Las Vegas will lag a broader industrial market recovery as competitive pressures remain high regionally and demand for industrial space by the construction industry stays weak well into the foreseeable future, Applied Analysis principal Brian Gordon said.

Deep discounting, particularly in warehouse and distribution product, may shorten the recovery timetable as selected retailers and distributors look to capitalize on favorable conditions, but it's hard to see this translating into net gains, Gordon said.

CB Richard Ellis reported 11.5 percent industrial vacancy in the third quarter and negative 306,665 square feet net absorption, while Colliers International showed 15.6 percent vacancy and positive net absorption of 177,029 square feet.

While Las Vegas has historically been among the first to recover from economic recession, empty hotel rooms, lackluster tourism and poor gaming revenue appear to be holding the city back this time, Dworkin said.

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