Las Vegas Valley’s speculative office vacancy rate in Q3, 2016 declined 0.2 points to 20 percent from Q2, 2016. Compared to Q3, 2015, the office vacancy rate is up 0.2 points, from 19.8 percent. Vacancy rates ranged from 15 percent for Class C space to a high of 28.2 percent for Class A space at the end of Q3. In terms of the trend, the Office market continues to improve, albeit slowly.
There was one office completion in Q3 – the Pecos Springs Business Park expansion, a Class C project in the Airport submarket at 8,028 square feet in size. In the last 13 quarters, 11 quarters have seen new space come to market. However, in the 15 quarters before that, only three quarters saw new completions. This also indicates some positive growth. On a year-over-year (YOY) basis, completions stood at 73,409 square feet at the end of Q3. The Valley’s spec office inventory remained 43.1 million square feet.
Net absorption for the quarter was at +86,000 square feet. Two of four products had negative absorption over the quarter with Class B office hurting the most at -47,400 square feet in losses. Class A saw -7,800 square feet in losses. Class C and medical, however, posted +97,300 and +43,900 square feet in gains, respectively.
Under-construction office space in Q3 was 260,000 square feet. Three projects comprised this: Phase 2 of Tivoli Village (Class A, 68,000 square feet), the Union Village Medical office building (medical, 150,000 square feet) and Pace Plaza (Class B, 42,000 square feet). Lastly, there were 337,480 square feet of planned office space at the end of the third quarter.
The good news is vacancy rates are very healthy. Notwithstanding, there was small negative net absorption in Q3 2016. An internal building survey reflects a 12.98 percent overall vacancy and CoStar reflects an 11.2 percent vacancy, yet not registering nearly 10,000 square feet of negative absorption that Dickson Commercial Group discovered.
Downtown is at 10.54 percent vacancy, Meadowood is at 9.57 percent vacancy and South Meadows is at 15.59 percent vacancy. According to CoStar, Class A vacancies are at 12.8 percent, 1.9 percent and 12.2 percent for those respective submarkets.
Dissecting the vacancy rates also produces opportunity. In order to attract and retain prime employers from an office environment perspective, the market is in need of quality. Companies such as ClearCapital and Grand Rounds entered this office market demanding facilities and building improvements corresponding to their company’s culture, client expectations and business model.
Capitalizing on that trend, Downtown won a new tenant in the female owned regulatory compliance software company, CAEK, Inc. CAEK leased approximately 13,000 square feet in Arlington Towers. The reposition of the 2nd floor of this mixed-used property by Reno Engineering, et al, has proved to be rewarding.
Lastly, as renovated projects flourish, 1 E. Liberty Street; a Class A 6 story office building located in Downtown Reno has been taken to the market for sale. The 98 percent leased building is anchored by US Bank and Starbucks and is listed for $21,485,000.
Southern Nevada analysis and statistics compiled by RCG Economics, Northern Nevada analysis and statistics compiled by Dickson Commercial Group.
*Does not include S. Lyon County, Douglas County, or Carson City