Struggles continue for Las Vegas office market

If Southern Nevada’s commercial real estate market were gym class, the office submarket would be the slow kid who finished last in the 50-yard dash.

As the Las Vegas Valley’s retail and industrial sectors sprinted toward recovery in the third quarter, the office sector straggled, according to new numbers from local research firm Applied Analysis.

Because the recession has given us enough bad news to last a decade, we’ll start with the positive stuff. Take the retail market, where vacancy fell to 9.6 percent in the quarter that ended Sept. 30. That’s still well above a 10-year average of 6.4 percent, but it was down nearly a percentage point from 10.3 percent a year earlier, for the market’s lowest vacancy level in almost five years, said Brian Gordon, a principal in Applied Analysis.

Credit little new inventory for the improvement. Developers added just 29,000 square feet of space in the three-month period, but retailers snapped up 181,900 square feet of space, helping chew through some of the sector’s boom-era overhang. Retailers who’ve backfilled space in recent months include discounters Ross Dress for Less, Stein Mart and TJ Maxx, as well as Office Depot and Conn’s HomePlus. And nonprofit Goodwill of Southern Nevada took down the 31,600-square-foot store that Ultimate Electronics abandoned in 2011 inside Rainbow Plaza in western Las Vegas.

Retailers are more confident thanks partly to surging taxable sales, which have risen 4.8 percent in the 12 months that ended in July, Gordon said.

“As overall spending continues to outpace population growth and inflation, demand for retail space appears to be returning,” he said.

The industrial market made even more progress. Its vacancy rate dropped to 14.8 percent, down from 17 percent a year ago and its lowest level since early 2010. And that dip happened even as the market added more than 930,000 square feet of space year over year to its 106-million-square-foot base.

But there were some big deals to sop up the new space: Organo Gold International, which distributes medicinal mushrooms as an alternative to coffee, leased 111,000 square feet in Henderson’s Pacific Business Center, while EBC Brakes USA signed for 65,300 square feet inside Arrowhead Commerce Center in southeastern Las Vegas. Plus SHFL Entertainment took over its new, 130,000-square-foot headquarters in the southwest, and the United Brotherhood of Carpenters wrapped up its 222,000-square-foot expansion near McCarran International Airport.

In all, industrial users absorbed 1.1 million square feet of space in the quarter. In the last year, the industrial market has reported 3.2 million square feet of net move-ins, the highest level since mid-2008, Gordon said.

And then there’s the office market. Developers brought on 110,000 square feet. Vacancy ticked up to 25.9 percent, compared with 25.8 percent a year earlier, and well above its 10-year average of 15.8 percent. There’s just too much empty space lingering after the recession for absorption, which has only recently begun to pick up noticeably, to make a big difference yet.

Still, Gordon predicted better times for the submarket. Net move-ins increased for the second straight quarter, and some big buys — including Blackstone’s purchase of the Hughes Center and Krausz Cos.’ buy of the former Manhattan West — signal that investors think the worst has passed, he said.

On the industrial side, if inventory levels and demand stay steady for the next year, vacancy would drop to 11.7 percent, closing in on a 10-year average of 10.5 percent.

Retail vacancies should continue to drop in the year ahead as well, said Rachel Stevens, a senior analyst with Applied Analysis.

■ The Commercial Alliance Las Vegas announced its 2014 officers and directors.

Hayim Mizrachi, CCIM, president and principal of MDL Group, will serve as president starting Jan. 1. Bobbi Miracle, CCIM, of Commercial Executives Real Estate Services, will be president-elect. Soozi Jones Walker, CCIM, SIOR, also of Commercial Executives, will take over as treasurer. Directors will include Prudential Americana Group’s Paul Bell, CRS, GRI; Kevin Buckley of First Real Estate Cos.; Chris McGarey, CCIM, CPM, of Prudential Americana; and ROI Commercial Real Estate’s Jennifer Ott.

Tedd Rosenstein, CCIM, of Nevada Development and Realty Co. will be immediate past president.

The alliance is the commercial real estate division of the Greater Las Vegas Association of Realtors.

■ Sun Commercial brokers helped several property owners sell or lease space in recent weeks.

Jeff Berg and Mica Berg represented One Nevada Credit Union in its sale of a 7,507-square-foot office building at 3450 E. Russell Road. Dolly Yau of Dolly Realty represented the buyer, Las Vegas J&J LLC, in the $550,000 deal.

Edward Bassford represented KFC U.S. Properties in its $550,000 sale of a 2,992-square-foot KFC restaurant building at 5587 S. Rainbow Blvd. Levi Parker of Las Vegas Investments and Realty represented the buyer, USCA Development LLC.

■ Brokers with MDL Group have closed several seven-figure deals.

Jarrad Katz and Galit Kimerling helped Pahrump-Zim LLC sell a 12,545-square-foot office building at 330 Lola Lane in Pahrump. The buyer, Doodle Properties LLC, paid $3.8 million. Danny Welsand of Welsand and Associates, represented the buyer.

Katz and Kimerling also represented Lewel LLC in its $1.65 million purchase of a 39,490-square-foot funeral home at 3975 S. Durango Drive. The seller, TEG Durango Pointe LLC, worked with Brenden Keating of The Equity Group.

Lisa Anderson and Jerry Hagfeldt represented Adobe Plaza Investments in its sale of a 17,398-square-foot office building at 1371 Warm Springs Road. Phillip Moskal of Moskal Real Estate represented the buyer, April Family Holdings, which bought the property for $3.1 million.

■ Michael De Lew and Greg Pancirov of Colliers International represented landlord Harsch Investment Properties LLC in an industrial lease to O’Hagin LLC. O’Hagin signed a 39-month deal on 24,079 square feet of space at 880 Wigwam Parkway, inside the Traverse Point Commerce Center. Cathy Jones of Sun Commercial represented the tenant in the $341,653 lease.

Contact reporter Jennifer Robison at jrobison@reviewjournal.com. Follow @J_Robison1 on Twitter.