Southern Nevada
The Las Vegas Valley anchored retail vacancy rate rose slightly from 10.2 in Q3. 2015 to 10.3 percent in Q4, 2015. At the end of Q4, vacancy rates ranged from 7.5 percent in power centers to 11.2 percent in neighborhood centers. With the retail market just above the 10 percent stabilized rate and taxable retail sales at all-time highs, the Valley’s anchored market remains fairly healthy. However, its recovery has been uneven, with some submarkets doing better than others. The major factors holding retail vacancy above 10 percent are the rise of distribution centers, the lack of good quality vacant space and the generally flat wages of workers. The Las Vegas Valley anchored retail vacancy rate rose slightly from 10.2 in Q3. 2015 to 10.3 percent in Q4, 2015. At the end of Q4, vacancy rates ranged from 7.5 percent in power centers to 11.2 percent in neighborhood centers. With the retail market just above the 10 percent stabilized rate and taxable retail sales at all-time highs, the Valley’s anchored market remains fairly healthy. However, its recovery has been uneven, with some submarkets doing better than others. The major factors holding retail vacancy above 10 percent are the rise of distribution centers, the lack of good quality vacant space and the generally flat wages of workers.
Developers seem to be holding out on new anchored retail construction and that’s why only 210,000 square feet were under construction at the end of Q4. And there are only 476,000 square feet planned in a market that has 44.3 million square feet of anchored inventory.
Net absorption in Q4 was approximately negative 35,400 square feet. This level of absorption dropped the year-over-year absorption to negative 124,800 square feet.
Space under construction in Q4 amounted to 210,000 square feet in two projects: Silverado Promenade and Durango Arby Plaza. There were also 476,000 square feet of planned anchored centers in four projects: Decatur 215, DC’s Plaza and Caroline’s Court, all in the northwest, as well as Smith’s at Cadence.
Las Vegas’ retail market is being significantly reshaped by E-commerce and catalog sales. This reshaping is making warehouse/distribution centers the “retail centers” of the future.
Northern Nevada
As 2015 came to a close, the Reno/Sparks retail market continued to improve from the previous quarters. Lease rates have improved from 2014 and we are seeing interest from national tenants again; along with local tenants expanding their businesses. UFC Gym, Dunkin Donuts, Nutrishops, Grateful Gardens, Full Pedal Indoor Cycling, Jimmy Johns and others are all looking to open new stores in the area. Larger, new leases signed such as Petco, Sleep Number Mattress, and Chick-Fil-A shows a national interest in the Reno/Sparks market. Investors are also showing confidence as there were also some notable sales of retail properties this year:Southwest Pavilion, Smithridge Center, CrossRoads Shopping Center, and SouthCreek.
The market saw an overall vacancy of 10.9 percent. The general freestanding vacancy was 7.9 percent, the shopping center vacancy 13.1 percent and the power center vacancy is 17.2 percent. Lease rates were between $1.35 to $3.00 NNN.
Reno/Sparks will be seeing a steady growth in retail. Expect to see new development starting and, in the case of Legends at Sparks Marina, a continuation of the exterior pads developed. While major franchises are moving into the area, the market for big box stores is notably not a major interest generator.
The interest of retailers in the area will continue to grow. With housing sales up and good retail locations still available, 2016 should show signs of improvement in the Reno/Sparks market. Rates will increase this year and vacancy will continue to go down throughout next year.
Southern Nevada analysis and statistics compiled by RCG Economics, Northern Nevada analysis provided by Dickson Commercial Group.