By CBRE Reno
During the first half of the year, the Northern Nevada industrial market laid a strong foundation for a successful second half of 2019. Robust transactional activity coupled with healthy construction activity were at the forefront of the market’s success. Construction completions totaled 1.1 million square feet during the quarter, driving the market wide vacancy rate up to 4.3 percent This increase provided tenants with more quality leasing options, leading to 732,005 square feet of positive net absorption in Q2 2019.
Leasing activity remained strong throughout the quarter, resulting in 998,879 square feet of gross absorption. Pre-leasing activity in new development played a significant role in the market’s success, with 239,445 square feet of collective leasing in these projects at the time of delivery. While small-scale tenant demand persists, the quarter also boasted three leases over 150,000 square feet. Additionally, the capital market sector continued to experience solid activity after an influx of investment opportunities occurred in Q1 2019. Overall investment volume reached $223 million in Q2 2019, 81 percent of the total transaction volume in 2018. These large-scale transactions continue to illustrate the level of confidence institutional investors have for the Reno industrial market.
Looking forward, the forecast calls for the continuance of strong leasing activity, institutional investment sales and new construction for the balance of the year. Additionally, market demand in the smaller end of the market is expected to remain strong, while average asking lease rates are projected to inch up in the near term.
Over the past seven years the Las Vegas industrial market has been experiencing one of the strongest market expansions in the country. A recent report by CBRE showed that, as of Q1 2019, the Las Vegas market was 10th in the U.S., for the amount of speculative warehouse space under construction. As more projects are announced, and break ground, Las Vegas will likely continue to move up in the national rankings.
Nearly 1.5 million square feet of space broke ground during Q2 2019—bringing the total amount of space under construction to more than 6.9 million square feet, with another 7.9 million square feet set to break ground within the next 12 months. Despite the amount of new space being constructed, demand has outpaced new supply, driving vacancies to unprecedented lows. For the second quarter of 2019 there was nearly 1.7 million square feet of new space that completed construction with more than 1.7 million square feet of positive net absorption.
Over the past couple of years, aggressive expansions by e-commerce companies have accounted for much of the demand for distribution space, however other active industries include brick-and-mortar retailers, convention services companies and third-party logistics companies. For the rest of 2019 new speculative development will continue to be constructed at an unprecedented pace and will provide the much-needed available space to ensure Southern Nevada remains competitive in the region in attracting new companies to the Valley.