The Northern Nevada industrial market ended Q3 2018 much as it began – a competitive, demand-heavy market with active pre-leasing and rising base rents. As a result, the quarter recorded 2.1 million square feet of net absorption and 2.4 million square feet of gross absorption. While the market is attractive to occupiers of varying sizes and needs, the most active users are those requiring 100,000 square feet or less. During Q3, 62 of 64 total transactions matched this profile.
Demand is showing no signs of slowing down across the region, the vacancy rate is among the nation’s lowest and industrial construction activity across Northern Nevada is healthy. In addition, a number of planned projects are expected to move into the active development phase towards the end of Q1 2019. In particular, manufacturing demand appears to be growing. While these occupiers have traditionally been users of second generation space, these companies are increasingly looking at build-to-suit opportunities because of limited existing supply.>
The industrial market in Northern Nevada continues to demonstrate strong performance. Since this time last year, quarterly net absorption has averaged in excess of 1 million square feet. With this level of demand and a declining trend in both vacancy and availability rates, strong fundamentals are expected moving forward.
The Las Vegas industrial market continued to show lower vacancies, positive net absorption and an increase in construction activity in the third quarter of 2018. Strong leasing activity and new, pre-leased, construction caused the overall market vacancy rate to decrease to a record low of 2.7 percent.
Demand continued to outpace new supply, driven largely by e-commerce, trade and transportation and manufacturing related companies. This has caused net absorption, for the third quarter, to be a robust 1.3 million square feet making it the 24th consecutive quarter with positive net absorption. New construction remained strong with 899,919 square feet of space delivered during the quarter. Of the 2.8 million square feet of new construction, year-to-date, 2.1 million square feet was in the North Las Vegas submarket. There is another 7.5 million square feet in the under construction or planning stages.
Companies specializing in the last leg of the supply chain, commonly referred to as “last mile”, have also been active in Southern Nevada. This trend is evident in the uptick in net absorption in midbay properties and has pushed the vacancy rate to a low 1.8 percent. Developers have responded to the increase in demand for smaller distribution spaces by adding more than 300,000 square feet of new midbay space this year, with another 184,350 square feet expected to be completed in the next couple of quarters.