Housing isn’t the only real estate sector in Las Vegas experiencing increased inventory.
The office market grew by 1.3 million square feet of speculative space, or space that’s built without being preleased, John Restrepo of Restrepo Consulting Group said in his first-quarter report.
Total office inventory stood at 35.5 million square feet with 10.8 percent vacancy, up from 9.3 percent in the fourth quarter and 8.4 percent a year ago, Restrepo reported.
It’s the highest office vacancy since the second quarter of 2005, he noted.
Rising vacancy is the result of a growing inventory of unleased space, with the high-growth submarkets of North Las Vegas, McCarran International Airport, Henderson and the southwest valley accounting for most of the vacant space at the end of the first quarter, Restrepo said.
Working with Colliers International brokerage in Las Vegas, Restrepo reported 3.8 million square feet of vacant office space and 2.1 million square feet under construction. Absorption, or the amount of space taken, has averaged 634,000 square feet over the past four quarters, which would indicate a 2.3-year supply to meet the valley’s office needs.
"If you look at potential inventory, you’ve got a 3 1/2 year supply," Restrepo said Wednesday. "The market starts observing that there’s too much planned space and some of those projects get put on the shelves or canceled altogether."
Joe Crisci, president of Las Vegas-based Crisci Builders, said he’s been building office space for companies such as Marnell Properties, Crescent Real Estate Equities and Thomas & Mack Group.
"We’ve been busy," he said. "We’re doing four floors in Hughes Center. Is it too much? I don’t know. I hope not. They’re not building them spec. They’re signed leases."
Crisci is near completion on the first two of eight buildings at James Professional Plaza, an 11-acre, $12 million office development on Badura Avenue geared toward medical professionals.
Applied Analysis, another Las Vegas-based research firm, reported 11.1 percent first-quarter vacancy for 41.9 million square feet of office inventory. Another 4.1 million square feet is under construction and net absorption for the quarter was about 600,000 square feet.
Average monthly asking rent is $2.32 a square foot, compared with $2.29 in the previous quarter and $2.17 in first quarter 2006.
Professional and business employment remained near the top of all employment sectors in growth, positively contributing to the demand for Las Vegas office space, Applied Analysis principal Jeremy Aguero said.
"That having been said, the pool of inventory remains high and this next wave of development will require longer-than-average lease-up periods and we may start to see increases in landlord concessions in the coming quarters," he said.
Stoltz Management and GoldenTree InSite Partners formed a joint venture to build Sunset Pilot Plaza, a 180,000-square-foot office park planned for Hughes Airport Center. They’re investing more than $50 million in the project.
Rob Vahradian, managing director of GoldenTree, said gaming and hospitality companies continue to move office and administrative functions out of hotels and casinos and into nearby office buildings, creating excellent tenant demand for the airport submarket.
The project has easy access to the freeway, Strip and McCarran International Airport and will allow tenants to draw from a broad labor pool throughout the valley, Stoltz executive Wes Jenson added.
LAS VEGAS OFFICE MARKET
|Q1 2007||Q4 2006||Q1 2006|
|Office inventory (square feet)||35.5 million||34.2 million||31.6 million|
|Under construction (sf)||2.1 million||2.8 million||3.2 million|
|Planned (sf)||3.1 million||3.9 million||3.8 million|
|Net absorption (sf)||602,487||485,161||385,040|
|Completions (sf)||1.3 million||785,819||312,386|
|Vacancy rate||10.8 percent||9.3 percent||8.4 percent|
|Average asking rent (sf)||$2.51||$2.39||$2.17|
|SOURCE: Restrepo Consulting Group|