The Las Vegas Valley anchored retail had an encouraging finish to 2016 with vacancy dropping 0.7 points from 11.2 percent in Q3, 2016 to 10.5 percent in Q4, 2016. At the end of Q4, vacancy rates were 6.8 percent in power centers, 11.8 percent in community centers and 11.4 percent in neighborhood centers. Record high taxable sales are playing a significant role in the anchored retail market’s recovery.
Development in the anchored retail market has picked up significantly in the fourth quarter. Space under construction is now at 330,000 square feet with planned space adding another 946,493, bringing the total forward-supply to well over one million square feet. Net absorption in Q4 of approximately 288,000 square feet was a welcome turnaround from the negative demand of Q3. This level of absorption brought the year-over-year total for 2016 to 431,423 square feet.
The 330,000 square feet of under-construction space was in two projects: The Edge, a 296,000 square foot community center in the southwest, and Phase 2 of Green Valley Crossing, 34,000 square feet of community center space in Henderson.
E-commerce has revolutionized the way consumers shop and warehouse/distribution centers are becoming the “retail centers” of tomorrow. While industrial market growth sustains at a healthy clip, the retail market lags behind, though several positive indicators in Q4, 2016 may show that local retail is beginning to close some of the gap.
As 2016 came to close, the 4th quarter showed slight decreases in vacancy rates (9.4 percent to 9.0 percent) and rental rates ($14.19 to $13.55) from the previous quarter. However, Northern Nevada retained its strongest net absorption in Q4, finishing with positive 140,876 square feet.
The general retail sector remains to be the most active in the market, dropping the overall vacancy from 7.8 percent to 5.4 percent over the course of 2016. Power centers stayed consistently high and ended the year with a 19.4 percent vacancy and positive net absorption of 13,374 square feet. No new inventory was delivered in Q4, however, 26,826 square feet of new retail development was completed in 2016 and over 82,000 square feet under construction at year-end.
The retail market had another active quarter with several large transactions completed. Ribeiro Properties sold two separate portfolios in Q4 totaling over 30,000 square feet of freestanding retail divided among six buildings.
The dynamics of the retail market are turning. Though Reno/Sparks is vibrant with new incoming companies, keep in mind the increasing force of online marketing and its effects on brick and mortar shops. There are still hesitations on the tenant side to commit to long term leases with the increasing rental rates in higher-end shopping centers. In contrast, there is a sense of stability in the retail market overall.