The Reno office market continues to be active and thriving. However, as new deals are finalized they are leaving offices vacant resulting in stagnant statistics. The first quarter of 2018 posted negative 13,792 square feet of net absorption. The Downtown submarket started the year off with 15,215 square feet of positive absorption and the South Meadows submarket with 31,880 square feet of positive absorption. However, the Meadowood submarket has been hit with some large vacancies and ended the first quarter with 43,316 square feet of negative net absorption. The Central and Airport submarket kept relatively static due to small leases and vacancies throughout the quarter.
The largest amount of negative absorption was in Class A office with 39,993 square feet. Class B and C had positive absorption with 20,894 square feet and 5,307 square feet, respectively. Direct vacancy rate for all classes increased from 11.1 percent at the end of 2017 to 11.4 percent for the first quarter of 2018.
The overall average asking rental rates for office did not change and held steady at $1.67 per square foot, per month, full service. Downtown has the highest average asking rental rates at $1.87 per square foot, per month, full service. Class A holds strong at $1.88 per square foot and Class B reduced slightly to $1.69 per square foot with Class C remaining unchanged from the previous quarter at $1.44 per square foot.
The Las Vegas real estate market continues to improve and show long term stability after thirteen consecutive quarters. Net absorption for leasing in Q1 2018 was 182,070 square feet, the weighted average asking rates for office space increased by $0.03 per square foot to $2.05 full service gross, and overall vacancy fell to 15.1 percent.
Investors continue to see Las Vegas as a value play. Office investment sales volume for Q1 2018 was $142.2 million, which was inclusive of twelve sales totaling +/-600,000 square feet and an average sales price of $215 per square foot. The average cap rate was 7.1 percent in Q1 2018 versus the 7.5 percent cap rate seen in 2017.
Southern Nevada’s office market had one Class B office +/-69,000 square foot building developed and delivered in Q1 2018 in the Henderson submarket. Additionally, the market will likely see close to 600,000 square feet of professional office space completed by Q4 2018 with another 800,000 square feet planned for completion in 2019. Pre-leasing of this new office product is very strong.
The Summerlin and the Southwest submarkets continue to have the highest demand for office space. Companies continue to seek well-located lifestyle centers that offer on-site amenities, which has bode well for projects like Downtown Summerlin, Tivoli and Town Square.