Vacancies within the Las Vegas commercial retail market moved upward while average asking rents continued to decline in anchored-retail centers during the first quarter of 2010. Reporting a vacancy rate of 10.5 percent at the close of the first quarter of 2010, vacancies remain up 0.9 points from 9.6 percent during the same period of the prior year (Q1 2009). With vacancies rising, downward pressure on average asking rents persisted during the first quarter. On a per-square-foot basis, average asking rents per month fell to $1.72, a 16.1-percent decrease from $2.05 witnessed just one year ago.
During the first quarter of 2010, more retail tenants moved out of space than moved in as the retail market reported negative net absorption of 147,400 square feet. Excluding pre-leased new construction, the negative net absorption trend has endured for well over a year with retailers struggling to maintain profitability as top-line revenues decline during the current economic cycle. Since the recession began more than two years ago, the retail market reported negative net absorption (net move-outs) despite the addition of 3.3 million square feet of space that completed construction suggesting vacancies will remain elevated for a significant period of time.
By quarter-end, the retail market reported 51.8 million square feet of inventory, consistent with the preceding quarter (Q4 2009) as no material projects completed construction during the past three months. Projects that remain actively under construction totaled approximately 809,800 square feet while plans for 6.7 million square feet remain on the drawing board. Inventory figures exclude nearly 1.2 million square feet of space that has stopped development due to current economic conditions.
The retail market in Northern Nevada weakened slightly from 2009 with an overall vacancy rate of 17.4% compared to year-end’s figure of 16.37%. Net absorption for the first quarter was a negative 19,742 square feet. The vacancy and net absorption numbers previously published were inaccurate and the above numbers are correct (our apologies!).
There is good news to report as activity has ticked up. Much of the new activity is in the restaurants, fast food, automotive, discount/value, dollar and cell phone categories. Tenants are still “in charge” and if a landlord is flexible and creative, there are deals to be made.
Of the 15.4 million square feet of retail space tracked by Colliers, line-shops were the most challenging with 1.1 million square feet available. This represents over 500 storefronts that have gone dark or have never been leased, being caught in the downturn. The quarter also recorded 20 anchor spaces over 25,000 square feet and 16 junior anchor spaces from 10,000 to 24,999 square feet, representing 1.3 million square feet of space on the market. Very little new construction is expected over the next few years. This will be significant in helping to absorb the 2.67 million square feet of vacant space on the market.
The most important factor for recovery is job creation. Northern Nevada is still lagging behind the national levels and while our economy continues to face challenges, Colliers retail team is cautiously optimistic and sees a light at the end of the tunnel.
Southern Nevada Analysis and statistics compiled by Applied Analysis, Northern Nevada Analysis and statistics compiled by Colliers International Reno