By CBRE Reno
When reviewing 2018 and examining overall real estate fundamentals, the Reno industrial market continues to perform well. The region has been running at historically high demand levels for the past six years characterized by consistent demand, disciplined development, strong fundamentals, and increasing rental rates. Illustrating this has been 12 straight quarters of vacancy rates below 6 percent and positive net absorption totals during 25 of the past 27 quarters.
While, the market experienced a bit of a correction in Q4 2018, producing negative net absorption and increased vacancy rates for the quarter, annual numbers remained positive. The market produced 3.6 million square feet of positive net absorption in 2018 and 6.7 million square feet of gross absorption during that same period, resulting in a 30-basis point drop in vacancy compared to Q4 2017.
Additionally, construction completions during the quarter totaled 1.5 million square feet and accounted for more than 60 percent of the total annual completions, adding much needed space to an already tight market. Consistent throughout this expansionary cycle, new supply was almost exclusively catered to high-cube product as large chunks of product were delivered to the market.
Looking ahead to 2019, the market expects to see similarly strong absorption totals as continued demand has prompted an uptick in construction activity. This is projected to place downward pressure on vacancy rates and upward pressure on asking rents.
For the last couple of years Las Vegas has been among the most dynamic industrial market in the U.S. and 2018 was no exception. At year end developers completed more than 3.1 million square feet of new space, and there is another 10.8 million square feet of space that is currently planned or under construction—setting 2019 up to possibly be another record year for new construction. Despite the significant amount of new construction, demand has consistently outpaced new supply causing the vacancy rate to decrease to historical lows.
Through the fourth quarter net absorption totaled more than 4.6 million square feet and the vacancy rate was a record 2.6 percent. Most of this growth has been a result of the increase in national retail and e-commerce companies establishing regional distribution and fulfillment centers in Southern Nevada. Of the total transactions that CBRE tracked, in 2018, nearly 40 percent of the total square feet leased were by retail or e-commerce related companies.
Over the last couple of years North Las Vegas has been the epicenter of this growth and has seen most of the large e-commerce companies expand here. Over the next 12-months North Las Vegas will see several more e-commerce/retail companies opening large distribution facilities. As e-commerce continues to make up a larger share of total retail sales, supply chains will continue to evolve to meet the shipping demand and Las Vegas will continue to be among the nation’s fastest growing industrial market.