The Las Vegas office sector reported positive net absorption for three consecutive quarters in 2014. By the end of the year, the office market vacancy rate was 23.6 percent. The latest vacancy rate is up 0.2 percentage points from the prior quarter, but it has declined 0.7 percentage points from a year ago.
During the fourth quarter of 2014, One Summerlin and The Gramercy completed construction, adding 400,000 square feet to the market. While both projects contributed to market-wide net absorption, yet-to-be leased spaces modestly impacted the vacancy rate. The market also welcomed the 60,000-square-foot speculative project located at Centennial Hills Center, bringing total completions for the quarter to 460,000 square feet. Total deliveries for the year were 506,000 square feet, which included the 46,000-square-foot Robert T. Eglet Advocacy Center that completed construction during the first quarter of the year. Completions in 2014 compared favorably with the 80,700 square feet completed in all of 2013.
Net absorption for the office market was positive 275,800 square feet in the fourth quarter of 2014, bringing the total for the year to 764,600 square feet of net move-ins, more than doubling the pace reported in 2013.
Construction activity fell to 242,700 square feet in the fourth quarter. Three projects continue to move forward throughout the Valley, including the third phase of Corporate Center at the Curve (45,700 square feet), the second phase of Tivoli Village at Queensridge (68,000 square feet) and the Federal Justice Tower (129,000 square feet) in the downtown area. An additional 2.1 million square feet remains planned.
As the year has progressed, the Northern Nevada office market has continued to improve at a healthy rate. The most notable trend is the continuation of in-bound businesses surveying Northern Nevada as a more likely candidate for relocation. The economic development in the office sector is increasing.
Although Tesla’s announcement captured the headlines in the industrial sector, others such as Independent Salon Services, Ghost Systems, Flirtey, White Rabbit and most recently, Clear Capital, have joined the growing list of tech-related companies joining Reno’s entrepreneurial community. These transactions are imperative to the momentum of the office market as just these companies alone absorbed over 50,000 gross square feet.
The inbound activity, coupled with organic corporate growth, fortifies the continued advancement in the office market with vacancy rates continuing to decline to the point that there are numerous developers planning on building speculative office product; an undertaking our community has not seen for the past decade. With Class A vacancy rates in the three core submarkets (Downtown, Meadowood and South Reno) decreasing to 10 year lows, prime office land acquisitions have been poised for future construction. Keep an eye out for the Rancharrah Business Center; a future project in the highly sought after Kietzke Lane corridor and existing building repositions made by Basin Street Properties (Gateway) and NevDex (Professional Circle) in South Reno.