Las Vegas topped 100 million square feet of industrial space with the addition of more than 1.5 million square feet during the second quarter, local business advisory firm Applied Analysis reported.
About 3 million square feet of industrial space has been completed in the first half of the year, including large projects such as Northern Beltway Industrial Center, Venture Point Speedway and North Point Business Center in North Las Vegas.
Industrial vacancy crept up to 7.7 percent in the second quarter, compared with 7.1 percent in the previous quarter and 4.5 percent in the same period a year ago.
The market is feeling the effects of a declining economy, higher fuel prices for regional distributors and caution on the part of business decision-makers, Applied Analysis principal Jeremy Aguero said.
Company expansions and relocations are much more limited today than at any point during the past five years, he said. This "prudence" is having a measurable effect on sales and lease activity in the industrial sector.
"We’re seeing it from everybody we talk to," Aguero said. "The bright side for the industrial market is they’ve been able to react quickly."
The 2.6 million square feet of industrial space now under construction is down substantially from 6.5 million square feet a year ago, he noted. Net absorption, or the amount of space taken by industrial users, totaled 695,000 square feet during the quarter.
"Supply is always important. In the long run, we’ll absorb all the space. But short term, expansions are going to be more limited than when the economy was running on all cylinders," Aguero said.
Jacint Simon, an industrial broker for ReMax Commercial in Las Vegas, said industrial building sales have slowed to almost a standstill.
"Users are on the sidelines and looking to see what happens with the economy," he said.
Leasing activity is healthier, Simon said. He recently put Apria Healthcare into a 40,000-square-foot warehouse at 1951 Ramrod Ave. in Henderson, negotiating a 10-year, $3.14 million lease on behalf of landlord Dick Blick Holdings.
Simon started marketing the property a year ago and Apria called on the second day, he said.
Larger, national companies are looking at the next five to 10 years of business, not just next year, and a 10-year lease usually commands lower than market rate, Simon said.
Applied Analysis showed average monthly asking rates of 79 cents a square foot in the second quarter, a 2-cent increase from the previous quarter and a 3-cent decrease from a year ago.
Although leasing continues to outpace sales transactions, the overall deal volume remained smaller than in recent quarters, said Dave Dworkin, research analyst for Grubb & Ellis, a commercial real estate advisory firm.
He found overall vacancy of 8.6 percent in the second quarter, with the highest (11.6 percent) in research/development and flexible industrial-office space and the lowest (7.6 percent) in warehouse and distribution space.
With 1.18 million square feet of industrial space under construction in the second quarter, new projects may not start until early next year, unless construction costs become more feasible, he said. This will ease overall vacancy as existing buildings get more tenants.
Colliers International calculated industrial vacancy at 8.7 percent for the quarter, up from 7.4 percent in the first quarter and 4.6 percent a year ago. Henderson had the highest vacancy at 11.9 percent and east Las Vegas was lowest at 3.6 percent.
The fundamentals for commercial real estate are generally healthy and supply risks are contained by tighter lending standards, a midyear report from Marcus & Millichap, an Encino, Calif., real estate investment services company, said.
Some lenders have reached capacity limitations and many have further tightened underwriting as they repair balance sheets. Debt capital is available, however, and transactions are occurring across markets and property types for "realistically priced assets," the report said.
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