The Las Vegas Valley industrial market continues to face challenges, including elevated vacancies. The industrial sector reported a vacancy rate of 18.5 percent by the close of the second quarter of 2012. Net absorption during the quarter was negative 103,000 square feet, which represented a slower pace of out-migration of industrial product compared to the preceding quarter. During the first half of the year, negative net absorption totaled 344,000 square feet, which was down dramatically (-75 percent) from the 1.4 million square feet of net move-outs reported in the first half of 2011.
Despite continued increases in the market’s vacancy rate, pricing remained flat during the second quarter of 2012. Average asking rates across all product types were $0.51 per square foot per month for the second consecutive quarter. Compared to a year ago, rates are down 5.4 percent. Since the peak (Q2 2007), average asking rates have declined 37.8 percent.
The Gowan Industrial Center completed construction during the second quarter of 2012, adding 65,000 square feet to the market. Two projects totaling 900,000 square feet remain actively under construction in the Las Vegas Valley. Both are future Switch data centers. Planned space totaled 221,600 square feet by the end of the quarter and includes a new 110,000-square-foot headquarters for Shuffle Master. Planned space is inclusive of 111,600 square feet that has stalled or delayed construction.
The Reno Industrial market got back on track this quarter with strong positive gross and net absorption. Some of the large prospects which had long been looking at the market made commitments. Vacancy started the quarter at 15.3 percent (including sublease space) and ended the quarter at 14.4 percent (12.4 percent excluding sublease space).
As expected, positive activity this quarter was a turn-around from a disappointing first quarter. Total number of transactions for the quarter was 33 which is slightly below the two year average of 38 and the average deal size was 39,413 square feet which is 29 percent higher than the two year mean.
The big deals led to gross absorption of 1,300,616 square feet which is 25 percent higher than the two year average. With fewer closures to detract from the good gross absorption, net absorption was a strong 649,441 square feet which is 7 times greater than the two year average.
Regarding rents with 14.4 percent vacancy there are still many landlords anxious to stop the pain and fill long term vacancies, which is holding rates down. A few consecutive quarters of positive absorption are needed before rents will rise. Business is still cautious due to uncertainty in Europe and the Presidential election. After November 6th, business will have some much needed clarity to make decisions in 2013.
Southern Nevada analysis and statistics compiled by Applied Analysis, Northern Nevada analysis and statistics compiled by NAI Alliance Reno