Las Vegas Market
While a cooling housing market has led to a modest decline in retail sales growth in the Las Vegas Valley, tenant demand for anchored retail properties remained high, evidenced by tight market conditions and solid rent growth.
Construction activity was high with 417,000 square feet of new retail space added in the third quarter 2007, increasing the Valley’s inventory to a total of 39.7 million square feet. On the demand side, the 460,300 square feet of absorption for the quarter exceeded completions, resulting in a closely balanced absorption-to-completion ratio of 1.1:1, or 1.1 feet of demand for every foot of new supply.
Given the large amount of newer, more expensive retail space entering the market, strong demand for anchored retail space and centers at virtually full occupancy, it is not surprising that rents increased in the third quarter to $2.25 per square foot.
Of the 3.65 million square feet of forward-supply, 54 percent was under construction with the remaining in the planning stages. The Valley has seen no completions of Power Center space since 2003, however, more than 1.2 million square feet is currently under construction.
If all of the anchored retail space presently under construction or planned is completed, it would increase the Valley’s retail inventory by 9.2 percent. If all available space in existing buildings were added to this forward-supply, it would take approximately 5.9 quarters to absorb it all.
Although the Reno/Sparks market posted positive net absorption throughout the year, the first signs of market slow down are starting to appear. Vacancy has continued to rise steadily from 7.8 percent in the second quarter to 8.05 percent. Vacancy rates should remain stable with a possibility of inching up.
Rents, particularly in new development with excess shop space and older B&C properties, could decrease slightly and landlords may need to consider incentives. As of the end of the third quarter, 986,390 square feet of retail space was under construction, primarily in the Spanish Springs submarket with Los Altos Crossing, Eagle Landing, and Pioneer Meadows Phase I currently under construction.
The story over the past two years was Summit Sierra Reno’s first open air center, but now attention is focused on Sparks with the Legends at the Sparks Marina, a 1.1 million-square-foot project that is easily the largest in the history of Sparks and could increase the city’s sales tax revenue by 50 percent. With the construction of a 248,000-square-foot Scheels All Sports well on its way, the Legends at Sparks Marina will certainly become a destination hot spot unlike any other in Northern Nevada.
Even with the Reno/Sparks market starting to reflect slowdown, it is not evident as projects continue to be constructed and retailers continue to expand into Northern Nevada.