The Las Vegas Valley’s overall industrial vacancy rate in Q2 2017 was 6 percent, up 0.5 percentage-points from the first quarter. Vacancies were up in every product type except for incubator. However, that did not put a dent in completions. A large amount of new space came to market during the quarter. The industrial market appears to be continuing to consolidate small units into bigger space to meet demand for large product distribution centers.
Q2 2017 saw 1,632,000 square feet completed in five projects, all of it in the warehouse/distribution product type. This was a strong quarter for completions after a slow start to the year in Q1. With nearly 5 million square feet currently under construction and another 6.7 million in the planning stages, there is plenty more space coming to satisfy the industrial market’s continuing need.
Thanks to the completions, net absorption in Q2 2017 remained positive despite the increase in vacancy rate, totaling +902,700 square feet. On a year-over-year basis, net absorption is at a healthy +3.7 million square feet.
There were 4.8 million square feet of space under construction in Q2. Twenty of the 21 projects comprising this space are of the warehouse/distribution variety and five of those projects are more than 400,000 square feet. The market ended Q2 with 6.7 million square feet of industrial space in the planning stages. Twenty-four of 28 planned projects are of the warehouse/distribution type there as well.
The second quarter of 2017 bounced back quickly after a slow first quarter for leasing. While the first quarter recorded only a small amount of positive net absorption, Q2 2017 recorded 1,355,676 square feet in net absorption and 1,955,267 square feet in gross absorption.
Notable leases included household names such as Panasonic and outdoor retailer Patagonia. Panasonic leased 220,000 square feet at 2777 USA Parkway in the Tahoe Reno Industrial Center (TRIC) and Patagonia leased 221,000 square feet at Dermody Properties’ newly completed Logisticenter at I-80 in Verdi, NV.
The North Valley’s market continued to be one of the best performing submarkets. The second quarter of 2017 had multiple large leases signed including CV Oils (112,000 square feet), Fulfilment Works LLC (88,000 square feet) and Ansell (271,000 square feet) at Panattoni’s North Valley Commerce Center. Outside of those deals, there were many transactions and expansions that took place in the smaller size ranges, between 10,000-60,000 square feet, signalling strength in small tenant and small business growth.
Despite the robust leasing in the second quarter, sales were relatively slow with most of the deals being smaller investment or owner-user purchases. The largest sale deals included a 1031 acquisition of an 8,847-square foot building situated on 3 acres of land. In addition, Catholic Charities acquired a 30,400 square foot building for $2,350,000.