By CBRE Reno
Industrial market fundamentals remained solid during Q3 2019 as the vacancy rate remained under 6 percent for the 15th consecutive quarter. Tight market conditions have fueled speculative development in 2019 as construction activity reached its highest level since 2015, with 4.0 million sq. ft. under construction. Most of the current projects (2.3 million sq. ft.) are scheduled for delivery in Q4 2019, adding much needed supply to the market. With solid tenant demand and healthy pre-leasing activity, the supply-demand imbalance should be lessened in the near term.
The steady demand led to more than 1.0 million sq. ft. of gross absorption in Q3 2019. But the positive activity was canceled out from one large-scale vacancy totaling 1.1 million sq. ft. This caused market wide net absorption to be negative during the quarter and produced an uptick in the overall vacancy rate to 5.4 percent. However, net absorption levels remained strong year-to-date at 1.2 million sq. ft. Additionally, the larger segment of the market (100k+) has also seen an increase in demand, which should bode well for the big-box developments currently underway.
Market activity is expected to continue during the next 3 to 6 months as a few mid and larger-scale tenants are actively seeking space and set to close before the end of the year. While new projects will help alleviate some of the supply constraints, demand levels should keep vacancy rates low and place upward pressure on average asking lease rates through the remainder of the year and into 2020.
Due to a strong and growing local economy, and the relative competitiveness within the region, Las Vegas has experienced one of the strongest industrial expansions in the country. Since 2015 developers have constructed more than 23 million square feet of industrial space, and 2019 is shaping up to be another record-breaking year for new construction.
More than 3.3 million square feet of space completed construction in Q3 2019, making it the highest amount of new space constructed in a single quarter in the market’s history. A few of the notable projects to complete construction include: Prologis I-15 Speedway, buildings 3 and 4 (1,008,588 square feet), SunCap Property Group/Colony Industrial SunPoint Crossing, buildings 1-3 (752,384 square feet) and Hines’ Raceway Industrial Park (670,798 square feet).
Developers continued to break ground on new projects and included more than 2.5 million square feet during Q3 2019. Major projects that broke ground include: Trammell Crow Company’s Golden Triangle Logistics Center-Phase I (1,002,538 square feet), and Matter Logistics Center @ West Cheyenne (725,840 square feet). Of the 3.3 million square feet under construction, 31 percent was pre-leased. The overall vacancy rate to increased 190 basis points, from the previous quarter, to 4.2 percent. Additional inventory should be a welcome relief for tenants looking to relocate or expand into the market, further solidifying Southern Nevada as a top tier industrial market in the region.