Positives, negatives reported in sector
Although the local economy continues to post modest gains from the downturn, commercial markets are showing mixed results in vacancy rates and average asking rents, the Applied Analysis business advisory firm reported in its third-quarter market monitor.
The office market vacancy rate fell to 25.2 percent during the quarter, down from 25.6 percent in the second quarter. Vacancies rose 0.3 percentage points from a year ago.
Net absorption, or the amount of space taken, was positive 245,600 square feet, partially attributable to completion of the 33,000-square-foot Martin Luther King Family Health Center on Martin Luther King Boulevard. Also, the University of Phoenix leased 53,600 square feet near the Las Vegas Beltway and Town Center Drive.
Pricing continued to decline, hitting $1.91 per square foot on a monthly basis, compared with $1.93 in the second quarter and $2 a year ago.
Randy Aleman, owner-broker for Encore Commercial in Las Vegas, said the commercial markets are on a slow, steady climb back from the recession. He recently leased 5,500 square feet of call center space at West Charleston Pavilion and 8,200 square feet around the Beltway and Russell Road to John Lee, president and chief executive officer of California-based BluFi Lending.
"He's becoming a Nevada corporation because California is raising his taxes," Aleman said. "Effectively, he's paying 16 percent state income tax. That's what's going to push people from California to Reno and Las Vegas."
Industrial vacancy increased to 18.6 percent, up 0.1 percentage points from the previous quarter and up 0.8 percentage points from a year ago, Applied Analysis reported.
With no new completions during the quarter, the industrial sector saw 46,600 square feet of negative absorption. Average rents remained flat for the third straight quarter at 51 cents per foot.
On a positive note, new development picked up with about 1.1 million square feet under construction, a level not seen since the third quarter of 2008, said Applied Analysis principal Brian Gordon.
"The price resetting that has gone on here has a number of investors entering back into the game," he said. "They can make new price points work from an acquisition standpoint."
Some of the valley's stalled projects are also gaining interest from investors, Gordon said. For example, Copper Point Business Park on Brent Thurman Way recently sold for $3.1 million.
The retail market saw vacancies drop to 10.2 percent, down from 10.9 percent a year ago.
About 11,000 square feet of new retail space was completed during the quarter, including additions to Winco Foods in Henderson and Albertson's in the southwest valley.
Net absorption rose to 179,300 square feet with the opening of a new Big Lots store in Centennial Center and Ross Dress for Less in Canyon Pointe. Fry's Electronics has delayed the opening of a second store in Las Vegas at Boca Park. A customer service associate for the retailer said she did not have access to further information.
New construction remains sluggish, with only the 300,000-square-foot second phase at Tivoli Village in progress. The Howard Hughes Corp. has announced plans to resume construction on The Shops at Summerlin in late 2013, with Macy's and Dillard's as anchors.
Retail average rents fell 5.3 percent from a year ago to $1.44 a square foot in the third quarter.
Commercial markets are showing some signs of stability in terms of mortgage defaults.
Notices of default were filed on two shopping properties in October. Lotus Retail Investment defaulted on a $2.7 million loan for a property at 1750 Rainbow Blvd., and Spencer Bevill is delinquent on a $1.08 million loan on retail space at 2515 W. Craig Road.
The largest default notice was for a $16.5 million loan on a 110,000-square-foot professional office building at 2445 St. Rose Parkway.
Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.
