By CBRE Reno
The Northern Nevada industrial market continues to demonstrate strength and resiliency. Despite a slow start to the year that recorded just over 70,000 square feet of net absorption, Q2 2018 leasing activity was robust with 1.8 million square feet of net absorption and 2.5 million square feet of gross absorption. The remainder of the year is expected to show continued high levels of activity and the need for expansion of the region’s industrial supply base.
Notably, leasing activity in Q2 featured only five transactions over 100,000 square feet, totaling 837,000 square feet. The balance of leasing deals (34) were 5,000-100,000 sq. ft., which is an underserved segment of the market. Given strong demand from this tenant profile and a limited construction pipeline to serve it, competition for space will be high and corresponding rental rate growth is expected.
Larger occupiers are still very engaged in the market and there’s significant activity impacting the future. Polaris acquired 43 acres in Fernley to construct a 515,000 square foot distribution facility, while several prospective tenants are in the market for 600,000 square feet or more.
The Northern Nevada industrial market remains active with a bright future. High demand from tenants of multiple sizes as well as ongoing investment activity should continue and positively impact strong market fundamentals
The Las Vegas industrial market is in the midst of a five and a half year recovery and is seeing the most aggressive expansion in the market’s history. At the end of the second quarter, over 1.5 million square feet of space broke ground bringing the total space under construction to nearly 3.2 million square feet. Additionally, there is 5.4 million square feet that is set to begin construction over the next 12-months.
Over 15 million square feet of new space has been added to the Las Vegas industrial market since 2015, however as of the second quarter the vacancy rate was at an all-time low of 3 percent. The record low vacancy, along with the high level of new construction, is indicative of robust tenant demand.
Net absorption during the second quarter was 1.9 million square feet, bringing the year-to-date total to nearly 3 million square feet, slightly higher than the same time period last year. Strong occupier demand has also pushed the average asking lease rate to $0.64 per square foot, the highest rate in nearly a decade.
Favorable market conditions have spurred an uptick in investor activity in the Las Vegas market. Total sales volume for industrial properties during the quarter was over $231 million which is about 65 percent higher than the second quarter of last year.