The overall vacancy rate for the Las Vegas Valley Industrial market in the second quarter was 6.2 percent, a drop of 0.5 points, from 6.7 percent in the first quarter of 2015. This decline equates to ten straight quarters of declining industrial vacancies. The strong growth in demand for industrial space, paired with resurgent construction and industrial employment, shows that the Valley’s industrial sector is once again going strong. Completions for Q2 were 464,203 square feet, in one project. The completed project is the Las Vegas Corporate Center No. 19 warehouse/distribution building in the North Las Vegas submarket. This brought the Valley’s industrial-base up to 108.7 million square feet.
Net absorption remained positive for the quarter with 948,800 square feet of space. On a year-over-year basis, net absorption was 4.3 million square feet. By sub-type, warehouse/distribution led the way with 1.9 million square feet. Light distribution posted 1.1 million square feet, followed by light industrial with 676,600 square feet. Every sub-type in the Valley’s industrial market posted year-over-year gains in net absorption.
Space under construction in Q2 was 3.5 million square feet. Fourteen projects comprised this space, including several large projects of more than 400,000 square feet: Pauls Corporation Industrial Buildings (443,000 square feet), Henderson Freeway Crossing (455,000 square feet), Jones Corporate Park (416,000 square feet), Blue Diamond Business Center Buildings #6 and #10 (430,000 and 495,000 square feet, respectively) and Switch’s Supernap #9 (575,000 square feet).
The second quarter of 2015 saw an increase in the vacancy rate for the Northern Nevada market. This was largely due to over a million square feet of new product being completed, including the 700,000 square foot Petco building in North Reno completed by Panattoni.
There was strong leasing activity, however with the addition of new product, the market is showing a negative absorption, going from 8.3 percent in the first quarter, to 9.2 percent in Q2. Speculative building and new product are positives to market conditions, expect to see rents strengthen throughout the year.
Tesla and Switch are both underway on major facilities in the Tahoe Reno Industrial Center. In the Sparks submarket, there was strong leasing activity with the retailer Patagonia leasing 79,200 square feet on Spice Islands Drive, and the third party logistics company Fidelitone, leasing an additional 95,200 square feet on Southern Way. Both of these leases were expansions, which signals further strength in the market and companies expanding their investment in the region.
New construction has been largely geared towards Class A distribution over 100,000 square feet, but expect to see developers speculatively building smaller industrial facilities in Q3 and Q4 of this year. Lastly, Dermody Properties sold the newly constructed Amazon distribution center on N. Virginia to Clarion Partners for $45,250,000 or $73 per square foot.
Southern Nevada analysis and statistics compiled by RCG Economics, Northern Nevada analysis provided by Dickson Commercial Group.