Las Vegas
According to the Nevada Department of Employment, Training and Rehabilitation, 169,800 industrial-related jobs were recorded in September 2007, a net decrease of 400 or 0.24 percent, from September 2006. During this 12-month period, the largest increase was in the Transportation & Warehousing sector, with 1,300 new jobs added, followed by Manufacturing, with 400 new jobs added. Construction lost approximately 1,300 jobs.
In the third quarter of 2007, the Las Vegas Valley’s speculative industrial vacancy rate increased by 0.4 percentage points to 4.8 percent. This increase in vacancy was also accompanied by a drop in the average monthly asking rent, from $0.82 per square foot to $0.76 NNN. The Airport and Henderson submarkets experienced the highest rent decreases, $0.14 and $0.09.
Overall, industrial completions (new space entering the marketplace) in the third quarter of 2007 totaled 935,543 square feet, a decrease from 1,308,438 square feet in the second quarter or 2007. This resulted in an absorption-to-completion ratio of .48 foot of demand for every foot of supply. The North Las Vegas submarket led Valley completions in the third quarter with 583,920 square feet.
Light Distribution industrial space had the highest net absorption with 211,724 square feet, followed by Warehouse Distribution, R&D Flex and Incubator. If all of the industrial space presently under construction or planned is completed, it would represent a 9 percent increase in the Valley’s industrial inventory. Additionally, if all available space in existing buildings was added to this forward-supply, it would take approximately 3.6 years to absorb it all.
Reno
More than 2.9 million square feet of construction has been completed as of the third quarter of 2007 thus far, with an additional 2.92 million square feet under construction and 2.26 million square feet planned within 12 months and 877,000 square feet offered for Build-to-Suit. The completion will increase the overall vacancy rate in the early months of 2008 especially in the Tahoe Reno Industrial Center in McCarran.
With the vacancy rate in TRIC at 48.7 percent in the third quarter it is obvious that any large credit tenants should be able to negotiate reasonably good concessions. Interestingly, even with more than 1.2 million square feet of vacant space in TRIC, outside developers continue to show interest in the Northern Nevada Market.
Development Arts has broken ground on a 632,000-square-foot building in the new West America Commerce Center, as well as McShane Development with a 566,200-square-foot building. Both McShane and Development Arts have additional phases planned, which should provide a steady stream of product for years to come.
To illustrate in interest point relative to the Northern Nevada vacancy, with the largest industrial base of 28 million square feet concentrated in Sparks with a vacancy of only 5.2 percent. Stead has a base of 8.8 million square feet and 8.3 percent vacancy, and the rest of Reno with 26 million square feet and vacancy at 5.3 percent. McCarran, with a base of 2.6 million square feet and a vacancy rate of 49 percent, distorts the picture and will continue to do so unless demand increases significantly.
