The office sector witnessed a quarter-over-quarter decline in vacancy rates for the first time in two years. During the third quarter of 2012, the vacancy rate fell to 25.2 percent, down 0.4 percentage points compared to the prior quarter (Q2 2012). However, the rate remains 0.3-percentage points higher than a year ago (Q3 2011). The sector reported approximately 245,600 square feet of positive net absorption.
The amount of space actively under construction increased to 328,200 square feet. Approximately 74,200 square feet is sourced to two buildings that stalled in the third quarter of 2009 and was recently resurrected. The second phase of Seven Hills Plaza comprises an additional 44,000 square feet underway. Also, three projects are actively under construction in the downtown submarket. Over 2.4 million square feet remains planned with few expected to start construction in the near future.
Office-using employment reported a year-over-year increase for the first time in twelve months in September of 2012. While the recent shift was only modest, it is an improvement from recent activity. Pricing levels are expected to continue to adjust as distressed assets are traded at lower overall valuations.
The region is striving to become a tertiary hub for continued data center activity. The call center trend of over a decade ago is back in swing. Two new service support centers have taken foot in the region to take advantage of the available work force and near plug and play office space.
Mid-Town continues to progress and attract small retailers and professional services firms to downtown. New vertical construction has commenced on the Thoma & S. Virginia Street site and Marmot Properties continues to transform their two block residential assemblage in the immediate area.
After a positive six months of net absorption, the market took a step backwards and gave back approximately 31,000 square feet in the 3rd quarter. Most of this give back space can be attributed to a few local companies downsizing in renegotiations of lease terms and the continued flight to quality benefiting the Meadowood and Downtown submarkets. This elevated the overall direct vacancy to 16.84 percent from 16.17 percent.
The Meadowood submarket, namely the Kietzke Lane & S. McCarran Boulevard corridor, continues to lead the way standing at 13.59% vacancy. Institutional tenants continue to endorse this area as it provides multiple Class A options with freeway visibility and access.
Southern Nevada analysis and statistics compiled by Applied Analysis, Northern Nevada analysis and statistics compiled by NAI Alliance Reno
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