LAS VEGAS – Demand for commercial real estate in Las Vegas has reached a seven-year high, according to Colliers International’s first quarter reports. Colliers International noted that all segments of commercial real estate saw positive net absorption in the first quarter of 2015, with the industrial market leading the way. Vacancy in warehouse buildings has been cut in half over the past five years and is now stimulating new construction. More than 8 million square feet of warehouse space, and nearly 10 million square feet of total commercial real estate, is now in some phase of development. This is the largest amount of product under development in Southern Nevada since before the Great Recession and an important sign of life for the local economy.
“After two years of recovery, Southern Nevada’s industrial market now appears to be back in growth mode,” said John Stater, research manager for Colliers International’s Las Vegas office.
After three years of slow and sometimes uneven recovery in the commercial real estate market, the industrial market looks to have re-entered growth mode. Las Vegas’ retail, office and medical markets faltered in 2014, but showed healthy growth in the first quarter of 2015. According to Colliers International, the first quarter of 2015 indicated that demand for office and medical space was finally catching up to increases in office employment in Las Vegas. The retail market, which stumbled in 2014 after two years of growth, looks as though it might be back on track despite the closure of several Food 4 Less locations.
Positive movement was also seen in the hospitality market, which saw record levels of visitor volume and improvements in several metrics, including average daily rate and revenue per available room. Colliers International noted that Southern Nevada appears to be at the forefront of new economic and demographic realities, which speaks well of the industry and should position Southern Nevada’s hospitality market for additional growth in 2015.
“The strength of the Las Vegas hotel market mirrors the robust improvement the hospitality sector is enjoying nationwide,” said Mike Mixer, executive managing director of Colliers International – Las Vegas. “Having hit a new visitor volume record in 2014, Las Vegas is now approaching peak levels for occupancy once again.”
Colliers expects that approximately $4.7 billion will be spent on Southern Nevada’s hospitality market between 2014 and 2016 before another $4 billion is spent developing the first phase of Resorts World Las Vegas in 2017.
Southern Nevada’s multifamily market continued to post low vacancy rates, which is stimulating new development. Several properties are now under construction in Southern Nevada and poised to expand the Valley’s multifamily inventory by more than 1,500 units over the next 15 months. In the first two months of 2015, multifamily sales volume was $27.1 million in 596 units, an average sales price of $45,500 per unit.
Colliers also noted that Southern Nevada’s land market, which fared poorly during the Great Recession, has seen a recovery in land sales over the past three years due to the reintroduction of residential and commercial development. Almost 900 acres of land were sold in the first quarter of 2015, more than half of it residential land. Prices for residential land were down slightly, while prices for commercial land increased.
Other key observations in Colliers International’s first quarter reports:
If Southern Nevada can maintain current rates of demand for industrial, it will likely return to what we would consider a healthy vacancy rate by 2016.
Call centers have seen healthy demand for office space the past three years, but large spaces with the requisite high parking ratio are becoming more difficult to find.
Speculative retail development remains restrained in Southern Nevada, which is positive. The market may have normalized, but vacancy remains elevated and the market still needs time to recover.
The medical market’s positive net absorption in the first quarter was accompanied by stronger gross absorption as well, indicating not only more activity, but a return to expansion for medical tenants.
“This could indicate that the Affordable Care Act’s woes have finally been factored into the market and its initial negative impact on the local medical market has run its course,” Stater said
The sales of the Riviera and Clarion for demolition and redevelopment have contributed to negative hospitality inventory growth in the first quarter of 2015.
The full report can be downloaded at: http://www.colliers.com/enus/lasvegas/insights/marketnews/lvqreport#.VSQYO_nF-pA
About Colliers International
Colliers International is a global leader in commercial real estate services, with over 15,800 professionals operating out of more than 485 offices in 63 countries. A subsidiary of FirstService Corporation, Colliers International delivers a full range of services to real estate users, owners and investors worldwide, including global corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services, mortgage banking and insightful research. The latest annual survey by the Lipsey Company ranked Colliers International as the second-most recognized commercial real estate firm in the world.