The Las Vegas retail market reported a slight decline in vacancies for the second consecutive quarter. While new pre-leased inventory largely held the vacancy rate down at 10.5 percent, the market recorded 203,300 square feet of positive net absorption during the first quarter of 2012. The latest market performance reflects the 12th consecutive quarter in which the retail vacancy rate remained in the 10-percent range. While elevated compared to historical levels, the vacancy trend suggests stability is taking hold. Despite positive net absorption during three out of the past four quarters, average asking rents continued to decline after holding within a relatively tight range in the prior year. During the first quarter, rents fell to $1.45 per square foot per month, or 5.5-percent below the $1.53 reported during the same quarter of the prior year. Deeply discounted pricing remains, and the latest period suggests there may still be room for further corrections.
Two WinCo Foods stores were delivered to the market during the first quarter of 2012, winding down the last construction projects the market is likely to welcome this year. The only other material project underway is the second phase of Tivoli Village at Queensridge, but this 300,000-square-foot addition to the project is further down the road in terms of timing and is slated for completion in late-2013. Plans for 4.3 million square feet remain on the drawing board, consisting primarily of stalled projects and future phases of existing centers.
The retail sector situation remains delicate with a number of empty big boxes propping up the vacancy rate across the valley. The bright spot is that employment and income gains, while mild, are improving, which has translated into stronger-than-expected retail spending.
The Reno/Sparks economic climate is showing continued signs of weakness as vacancy rates established new record highs. This reverses a trend observed in earlier quarters showing signs of stabilization. Although the vacancy rates increased, the area had a positive net absorption during the first quarter of 51,191 square feet. This is the seventh consecutive quarter of positive net absorption. Although the net absorption number remains modest, it is moving in the right direction and staying positive.
The net absorption during the quarter can be attributed to multiple smaller leases and two larger leases. During the quarter, there were 30 businesses moving into shopping centers consisting of 313,653 square feet while during the same period, 43 businesses moved out consisting of 277,911 square feet. This continues a trend seen in two of the last three previous quarters with the number of new businesses moving out being larger than those moving in.
Two larger tenants leased space this quarter. The first was the relocation of Lowe’s into the Legends project occupying 124,076 square feet, leaving their former location vacant. The second was the opening of the Wal-Mart in Lemmon Valley with 160,891 square feet in a newly constructed building. These two large tenants help explain how we had vacancy rates increase while at the same time having positive net absorption.
The line shop vacancy rate has established a new record at 22.70 percent. The anchor vacancy rate is also a new record at 15.83 percent, with the overall vacancy rate at a new record of 18.60 percent. While the continuation of these high vacancy rates are causing financial pressures for some landlords, it is creating opportunities for new businesses as landlords aggressively compete for the few tenants looking for space.
Southern Nevada analysis and statistics compiled by Applied Analysis; Northern Nevada analysis and statistics compiled by NAI Alliance Reno.