The Las Vegas industrial market vacancy rate fell to 8.0 percent in the fourth quarter of 2014. The vacancy rate is down 3.6 percentage points from a year ago. Industrial vacancies have been in the single digits for three consecutive quarters with annual declines reported for 12 consecutive quarters. In addition, the vacancy rate has declined 9.0 percentage points since the high reached in 2011.
One industrial project completed construction in the fourth quarter of 2014, bringing total inventory to 107.9 million square feet; the 35,500-square-foot speculative project is located at 5955 Hauck Street. The market reported 622,100 square feet of positive net absorption in the fourth quarter, bringing the total for the year to 4.5 million square feet of net move-ins. During the quarter 4Wall Entertainment Lighting leased roughly 122,000 square feet and Marshall Retail Group reportedly signed a deal for 75,000 square feet.
Construction activity reached 2.2 million square feet by the end of 2014, which is the highest level of development since the 2.5 million square feet reported in 2008. A number of projects continued to make progress, including MEC Contractors (51,500 square feet), Thatcher Company of Nevada (53,700 square feet), The Chef’s Warehouse (74,100 square feet), Konami Gaming (193,400 square feet), TJ Maxx (400,000 square feet), Prologis Las Vegas Corporate Center #19 (464,200 square feet) and Switch SuperNAP 9 (575,000 square feet). In addition, Catamaran broke ground on a 100,000-square-foot facility in the Harry Reid Research & Technology Park and Switch started work on its 240,000-square-foot SuperNAP 10.
The past year will be noted as one of the better years in Northern Nevada industrial market history. There was strong positive absorption for the year, rental rates firmed and new construction projects are now reality.
With new construction becoming available, vacancy could increase even though there is good absorption activity and this was the case in Q4 2014. A new 624,000 square foot facility was leased by Amazon vacating 588,000 square feet which hit the market in the fourth quarter. The vacancy rate rose slightly throughout the quarter from 8.4 percent to 8.6 percent. Gross absorption for the quarter was 1,058,831 square feet and there were 39 deals completed in the quarter.
Gross absorption was on equal with our best years at 6,227,903 square feet. Net absorption was roughly two-thirds of our record years but still respectable at 2,184,634 square feet. The year began with the vacancy rate at 9.0 percent and finished slightly less at 8.6 percent. Vacancy would have been significantly less had it not been for the new construction added to the market and the resulting vacancies created as existing area users expanded.
After a five year lull, construction resumed again in 2014 adding 2.2 million square feet to the market. Three large construction projects included Zullily at 707,000 square feet, Dermody’s speculative building of 624,000 square feet and SanMar’s 606,000 square feet. There are a number of projects both speculative and build to suit slated for completion in 2015 and it is expected to be a banner year for construction.