The commercial real estate market in Las Vegas has been on the mend since the recession. In the third quarter of 2018, the market saw positives across several sectors.
According to a report from Colliers International Las Vegas, vacancy rates fell to 4.6 percent in the industrial market, with office space hitting a 10-year low of 14.5 percent, which was a one-point decrease from a year ago, according to the report. Office vacancy is still higher than the pre-2006 average of 9 percent vacancy, the report added.
Office vacancy decreased in seven of eight of the valley’s submarkets in the third quarter.
“When examined by the size range of vacant units (including vacant units for sublease), the third quarter of 2018 continued the trend of high demand for small units. Tiny units (up to 2,500 square feet) saw the strongest demand, with vacant square footage falling,” the report stated.
Brian Gordon, principal analyst at Applied Analysis, noted in a third-quarter report that the office market was continuing its recovery. Applied Analysis is tracking a vacancy rate of 17.7 percent for the quarter for office.
The market is shifting in office with prior quarters bringing built-to-suits and owner-occupied developments in office with speculative projects now being added to the mix. Overall, Applied Analysis tracked 339,600 square feet of completions in the third quarter.
“It is also worth noting that the majority of completions came from the west and southwest submarkets, and they had substantial pre-leasing in place prior to entering the market,” Gordon stated. “Proximity and access along Interstate 215 remain key factors for tenants. Supply-demand dynamics remain relatively stable in the Southern Nevada office market, and the expectation is for that to continue into 2019.”
The industrial market also saw positives in the third quarter with vacancy rates falling to 4.6 percent, a decrease from the previous quarter’s 5 percent rate and a year-ago rate of 4.9 percent.
Asking rental rates remained at 66 cents per square foot on a triple net basis in the valley with construction activity increasing, according to Colliers. The Las Vegas firm’s report shows more than 805,000 square feet of industrial space being completed in the third quarter with nearly 455,000 square feet in the second quarter. That’s still lower than the more than 1.4 million square feet completed in the third quarter of 2017.
The retail sector also had gains in the third quarter. According to Colliers Las Vegas, “net absorption improved for the second straight quarter, reaching 137,573 square feet.”
Vacancy did increase to 8.2 percent for retail in the third quarter over the second quarter’s 8.1 percent, but Colliers pointed to the completion of 184,000 square feet of retail space as the reason.
Asking rents decreased to $1.36 per square foot in the third quarter on a triple net basis, over the second quarter’s $1.38 per square foot average. In the third quarter of 2017, average asking rents sat at $1.34 per square foot.