Southern Nevada
Las Vegas Valley’s office vacancy rate in Q3 2017 declined by 0.9 points to 18.3 percent from Q2 2017. Compared to Q3 2016, the office vacancy rate was down 1.8 points, from 20.1 percent. Vacancy rates ranged from 15.9 percent for Class C space to a high of 20.8 percent for Class B space in Q3. Las Vegas Valley’s office vacancy rate in Q3 2017 declined by 0.9 points to 18.3 percent from Q2 2017. Compared to Q3 2016, the office vacancy rate was down 1.8 points, from 20.1 percent. Vacancy rates ranged from 15.9 percent for Class C space to a high of 20.8 percent for Class B space in Q3.
There were no spec office completions in Q3. On a year-over-year basis, completions stood at 270,000 square feet at the end of Q3. The Valley’s office inventory remained 43.4 million square feet.
As the vacancy rate declined, net absorption improved from the previous quarter as well with +378,000 square feet. On a year-over-year basis, net absorption was at +972,800 square feet. Of the four product types, only one saw negative absorption during the quarter, with Class C experiencing a drop of -25,700 square feet. This quarter’s improvements bring the vacancy rate under 19 percent for the first time since Q4 2009, when the rate was climbing quickly in the wake of the Great Recession.
At the end of Q3, four projects were under construction in the office Market: Sunset Hills Plaza, a 15,000-square foot office building (Class C), Jones Beltway Business Park, a 16,480 square foot building (Class B), St. Rose Coronado Center #1, a 62,364-square foot building (Class B) and Downtown Summerlin-Phase 2, comprising 150,000 square feet (Class A). The amount of planned space increased from the previous quarter and now stands at 626,000 square feet.
Northern Nevada
As a result of the success of economic development and diversification, the area should continue to see successive growth both locally and regionally. Population growth has a pass through effect on all commercial sectors; office, retail, industrial, multi-family, investment and storage. The resulting effect of this continued growth has caused all aspects of development and investment to increase in cost. As a result of the success of economic development and diversification, the area should continue to see successive growth both locally and regionally. Population growth has a pass through effect on all commercial sectors; office, retail, industrial, multi-family, investment and storage. The resulting effect of this continued growth has caused all aspects of development and investment to increase in cost.
The increased cost of commercial land and the increased cost of cost of construction and shortage of construction labor have pushed development cost to the point that we’ve seen a back-lash in that some projects and interested developers are pulling out of project and or waiting until the economy cools down.
With the growth and investment in Reno, the performance of the office market reflects the same. There has been 16,480 square feet of net absorption Q3 2017, compared to 22,098 square feet positive in Q2 2017 and 26,687 square feet Q1 2017. This reflects a slowdown in growth to the extent that vacancy rates have dropped minimally to 10.76 percent overall; per submarket 11.82 percent in downtown; 8.86 percent in South Reno and 8.72 percent in Meadowood.
Market growth was led by new leases and expansions by those such as Elemental LED Inc., Lighthouse Real Estate Solutions, Impact ABA Services, DR Horton, Inc. and Basin Street Properties.
Southern Nevada analysis and statistics compiled by RCG Economics, Northern Nevada analysis and statistics compiled by Dickson Commercial Group.
