Las Vegas Valley’s office vacancy rate in Q1, 2017 increased by 0.1 points to 20.3 percent from Q4, 2016. Vacancy rates ranged from 15.4 percent for Class C space to a high of 27.0 percent for Class A space in Q1. Across the board, office submarkets are well above the 10 percent stabilized rate.
There was one Spec Office completion in Q1, the 150,000 square foot Union Village Medical office building in the Henderson submarket. In the last 15 quarters, 13 quarters have seen new space come to market. However, in the prior 15 quarters, only three quarters saw new completions. This suggests that the market has been improving, and there’s growing demand for space of a certain quality. On a year-over-year basis, completions stood at 313,028 square feet at the end of Q1. The Valley’s office inventory rose to 43.4 million square feet.
While the vacancy rate increased, net absorption is slightly improved from the previous quarter with +94,535 square feet. On a year-over-year basis, net absorption was a tepid +182,670 square feet. Of the four product types, only one saw negative absorption during the quarter with Class B experiencing significant drop of -222,708 square feet.
At the end of Q1, only one project remained under construction in the office, Sunset Hills Plaza, a 10,000-sf office building in the southwest submarket (Class C). However, the amount of planned space increased from the previous quarter and now stands at 706,780 square feet.
The law of averages in the Northern Nevada office market persists with a Q1 performance of 90,230 square feet of gross absorption; 26,687 square feet of net absorption, per DCG’s Top 200 survey, and 127,599 square feet of net absorption per the CoStar report. This is similar to the quarterly average dating back over 10 years.
The two largest lease transactions of the quarter were Centene Coropration, a multi-line healthcare program and services provider, and the Nevada State Contractors Board. Both signify the continuing trend in the growing healthcare services and construction industries.
The quarter over quarter vacancy rate dropped to an overall 12.49 percent, down from 12.62 percent, per DCG’s Top 200 survey and down 10.4 percent down from 11.2 percent per the CoStar report. The Meadowood and Downtown Central Business District submarkets continue to lead with falling vacancy rates. This trend reflects the healthy shortage of Class A space and has encouraged occupiers to consider alternative submarkets, such as the Airport. The Airport submarket has fallen below 11 percent vacancy.
Class A lease rates continue to escalate reaching $2.30 per square foot, per month, full service gross, for second and third generation spaces. Class B and C rates are stagnant fluctuating between $1.20 and $1.70 per square foot, per month, full service gross.