The Las Vegas Valley’s overall industrial vacancy rate in Q1 2017 was 5.5 percent, 0.3 percentage-points up from the 4th quarter of 2016. The warehouse/distribution product type was responsible for the vacancy increase as vacancy was down in all other product types. A large amount of warehouse/distribution space came to market in the second half of 2016; and the industrial market continues consolidating small units into bigger space to meet demand for large product distribution centers. The Valley’s industrial market remains healthy despite this quarter’s uptick in vacancy.
Q1 2017 saw a relatively modest 315,000 square feet completed in two projects, all of it of the warehouse/distribution product type. The two completions were the 240,000 square-foot Henderson Commerce Center, Building P and the 75,000 square-foot Enclave (3G HQ) in the airport submarket. The addition of these two projects brought the Valley’s total rentable industrial space up to 114.6 million square feet.
Net absorption took a dive in Q1 2017, totaling -30,599 square feet to start off the year largely due to a lack of space. On a year-over-year basis net absorption is at a healthy +3.1 million square feet.
There were 6.1 million square feet of space under construction in Q1. Nineteen of the 20 projects comprising this space are of the warehouse/distribution variety and seven of those projects are more than 400,000 square feet: The market ended Q1 with 7.4 million square feet of industrial space in the planning stages.
The first quarter of 2017 had a slowdown after a very robust 24 months. The market in the first quarter had 1,162,730 square feet in gross absorption and 907,312 square feet in negative absorption, resulting in only a slight amount of positive net absorption.
Despite the slower quarter, and the slightly reduced number of total transactions quarter-over-quarter, the demand for big-box space remained high with five transactions in excess of 100,000 square feet. Four of which were lease transactions and one of which was an owner user acquisition.
Northern Nevada had a record breaking winter which caused new construction to nearly halt in February and March. However, several projects are back full steam ahead with over 550,000 square feet of speculative development expected to be delivered over the next few quarters. Dermody Properties has one new building near completion at their Logisticenter at I-80 West, with a second underway Mckenzie Properties has two standalone buildings that are close to completion and Tesla continues to expand in the Tahoe Reno Industrial Center with another two million square foot expansion underway at the Gigafactory.
For the sales and investment market, The first quarter of 2017 had only a few notable sales as compared to a very robust end of 2016, where the market saw several large multi-building dispositions.The average deal size in Q1 was $59 per square foot.