Southern Nevada
The Las Vegas Valley spec office vacancy rate in Q4, 2015 declined 0.1 points to 18.4 percent from Q3, 2015. Compared to Q4, 2014, the office vacancy rate is down 0.5 points, from 18.9 percent. Q4’s vacancy rate drop means that the Valley’s office market has improved for four straight quarters. Vacancy rates ranged from 13.3 percent for Class C space to 27.1 percent for Class A space at the end of Q4.
There were two spec office completions in Q4. They were both Class C buildings at the Pecos Springs Business Park. On a year-over-year basis, completions stand at 274,500 square feet. For Q4, the Valley’s spec office inventory remained 43.1 million square feet.
Net absorption in the Valley’s spec office sector for the quarter was 50,600 square feet. On a year-over-year basis, net absorption was 482,900 square feet. By product, Class C led the way with 324,400 square feet. Class B posted 153,800 square feet in gains, followed by Medical with 41,400 square feet. Class A brought up the rear, posting a year-over-year net negative absorption of -36,700 square feet.
Spec office space under construction in Q4 was 233,800 square feet. Four projects comprised this space: Phase 2 of Tivoli Village in the northwest submarket (Class A-68,000 square feet), the Union Village Medical office building in Henderson (Medical-150,000 square feet) – part of a new mixed-use development that includes the 142-bed Henderson Hospital as the anchor – and two buildings at Pecos Springs Business Park in the Airport submarket (Class C-7,894 square feet each). Lastly, there were a reported 431,000 square feet of planned office space at the end of the fourth quarter.
Northern Nevada
Activity in the Northern Nevada office market continued pace in Q4, 2015. Historically, it is normal to see fluctuation in tenant and owner user inquiries in fourth quarter performances but the market held resilient and saw positive growth and absorption by year end.
Last quarter there was a comparative spread in lease rates between freeway-situated office buildings and infill office buildings. As vacancy rates tighten, the market is also seeing the delta in those respective lease rates diminish. While NevDex Properties continues to achieve rates over $2.05 per sq. ft., per month, full service, property owners at Thomas Creek and other projects positioned internally to the submarket geographically, have seen new and renewal rates rise to $1.80. What was a 20 to 25 percent delta has now become 15 to 20 percent. This is a sign that if absorption continues, upward rate pressure will continue as well.
Downtown continues to thrive. CoStar data shows a 11.7 percent vacancy within this submarket, down from 12.4 percent at the end of Q1 2015. Records show that the vacancy in the top 40 Downtown buildings is only 10.97 percent. Only two 10,000+ square foot spaces remain in Class A buildings Downtown. Both will demand tenant signage and branding opportunities. Basin Street Properties, Reno’s largest Downtown office building owner, approaches an 11% portfolio vacancy as the year closes.
The end of the year brought an additional 76,000 sq. ft. of positive net absorption. The market’s 250 buildings over 10,000 square feet finished the year at a 14.9 percent vacancy.
Southern Nevada analysis and statistics compiled by RCG Economics, Northern Nevada analysis provided by Dickson Commercial Group.
