The Las Vegas Valley retail vacancy rate dropped 0.2 percentage points to 10.1 percent in Q1, 2016, a positive start to the year. At the end of Q1, Southern Nevada’s vacancy rate was again lowest in power centers at 7.2 percent. Neighborhood and community centers were almost even with vacancy rates of 10.9 and 11 percent, respectively.
As of the end of Q1, developers started construction on another 72,000 square feet of anchored space, bringing the total amount of under-construction space to 282,000 square feet. The amount of planned space in Q1 is 658,000 square feet, an increase of 182,000 square feet from Q4 of last year.
Net absorption in Q1 was approximately 82,321 square feet. This level of absorption brought year-over-year absorption up to 213,968 square feet. Community centers accounted for most of the year-over-year absorption with 184,473 square feet. Neighborhood centers added 67,547 additional square feet of absorption, while power centers, the only submarket with negative year-over-year absorption, saw -38,052 square feet of total absorbed space in the Retail market.
The Las Vegas retail market’s major concern when considering the future is the growth of e-commerce and online retail. Over the years, we have watched as major book and electronics stores closed up shop and, today, two major sporting goods chains are going out of business, partially the result of online shopping.
The first quarter of 2016 has been very active. The vacancy rate dropped by 0.02 percent over the last quarter of 2015. We are seeing a lot of activity in anchored shopping centers.
Kimco, one of the largest property owners of shopping centers has seen several of their spaces leased; many of the tenants are already in this market. The organization is looking to expand into other locations within the Reno/Sparks/Carson City market.
Rental rates have also increased slightly. With better locations being leased, landlords are finally able to negotiate slightly higher rents. Class B and C retail locations still have not seen an increase in rents. But with better locations being absorbed, Class B and C shopping centers should see some increases soon.
New retail construction is still non-existent. There has been some new retail sites close escrow, which will lead to some new construction on a smaller scale. Most new sites are working to pre-lease before any construction will start. New construction rates are expected to be from $2.50 to $3.50 per square foot.
Overall, expect the second quarter of 2016 to be just as active. There are some significant tenants looking to sign leases in the next few months. The most active retail use is still restaurant users. Second generation locations should begin to open back up with new, exciting restaurants, along with nationally-branded names.
Southern Nevada analysis and statistics compiled by RCG Economics, Northern Nevada analysis provided by Dickson Commercial Group.