Las Vegas Valley’s speculative office vacancy rate in Q4, 2016 increased by 0.1 points to 20.2 percent from Q3, 2016. Compared to Q4, 2015, the office vacancy rate was up 0.2 points, from 20 percent. Vacancy rates ranged from 15.4 percent for Class C space to a high of 28.2 percent for Class A space at the end of Q4. The office market has fluctuated back and forth between 20.1 and 20.2 percent vacant throughout 2016.
There was one office completion in Q4, Tivoli Village’s Phase Two expansion, a Class A project at 120,000 square feet in size. In the last 14 quarters, 12 quarters have seen new space come to market. On a year-over-year basis, completions stood at 178,816 square feet at the end of Q4. The Valley’s office inventory rose to 43.2 million square feet.
Net absorption for the quarter was +34,591 square feet. On a year over year basis, net absorption was a disappointing +78,558 square feet. Of the four product types, two saw negative absorption over the quarter with medical office hurting the most at -38,941 square feet in losses. Class A and Class B; however, posted +86,617 square feet and +9,547 square feet in gains, respectively.
Under-construction office space in Q4 was 160,000 square feet. Two projects comprised this space: the Union Village Medical office building in Henderson (150,000 square feet), an office building in the southwest submarket (Class C-10,000 square feet). Lastly, there were 506,480 square feet of planned office space at the end of the fourth quarter.
Not much changed in Q4 of 2016 over the previous quarter, but the market remains steady. Numbers reflect a small positive net absorption in Q4 2016 of 21,207 square feet. DCG’s internal building survey reflects a 12.57 percent overall vacancy while CoStar reflects an 11.2 percent vacancy, slightly down from 11.4 percent in Q3, yet states positive net absorption of 61,550 square feet for the overall office market and 3,417 square feet of positive absorption in Class A product.
Vacancies in submarkets fluctuated both up and down. Downtown is at 11.61 percent, Meadowood at 10.3 percent and South Meadows is at 12.13 percent. According to CoStar, much remained the same reporting Class A vacancies at 12.4 percent, 11.9 percent and 12.2 percent for those respective submarkets.
In continuing the positive trend, some of the notable transactions in Q4 included; Online Tech Stores with 17,325 square feet, Tanamera/ArchCrest with 15,000 square feet, Klondex Mines with 12,629 square feet, Fusion Contact Centers with 9,887 square feet and Gaming Capital Group with 7,032 square feet.
As Northern Nevada moves into the new year, expect to see a continued decline in overall vacancy, which conversely will push lease rates higher. Comparative to other West Coast competitors, the region is still very attractive with significantly lower average lease rates, a high quality of life and a business friendly environment. Alternatively, there are some concerns; lack of new inventory, perceived lack of educated employee base and lack of large scale vacancies (+10,000 sf).