By CBRE Reno
The industrial market continues to exhibit robust demand, finishing the year with 2.5 million square feet of net absorption, bringing the year-end total to 3.7 million square feet. This was the seventh consecutive year where occupancy gains exceeded 3.5 million square feet. Overall, tenant demand remained diverse over the course of 2019 with significant activity coming from both distribution and manufacturing tenants.
As a result, the market wide vacancy rate dropped by 100 basis points, ending the quarter at 4.5 percent. This represented the largest drop during the last two years. Low vacancy rates are expected to persist in the near term even with development activity gaining velocity to accommodate strong industrial demand. As such, more than 1.5 million square feet was delivered in Q4 2019. However, several transactions of scale are already poised for early 2020, which could continue to reduce the available supply of leasable space in both existing projects and new deliveries.
The capital markets sector saw strong demand in Q4 2019 from institutional investors across all asset classes. Market cap rates currently range between 4.9 and 5.7 percent for Class A to Class C properties, respectively. This activity is anticipated to continue in 2020, providing downward pressure on cap rates. The regional outlook for 2020 is positive as market fundamentals are expected to remain strong with significant amounts of new construction, strong leasing activity and incremental increases in the average asking lease rate.
Expansion has been the overarching trend in the Las Vegas industrial market over the past 7-years. Throughout 2019 Las Vegas has been among the fastest growing industrial markets in the country and, based on the amount of space under construction, there are no signs of slowing.
New completions for the fourth quarter 2019 totaled 381,454 square feet, bringing the year-end total of new space completed to over 7 million square feet—the second highest in the market’s history. As of the fourth quarter 7.2 million square feet of space was under construction and there is another 7 million square feet of planned space.
A few notable projects under development include Trammell Crow Company’s Golden Triangle Logistics Center – Phase 1 (1,002,538 square feet), CapRock Partners’ Interchange Industrial Center (683,436 square feet) and Matter Logistics Center @ West Cheyenne (725,840 square feet).
Net absorption for the fourth quarter was 929,918 square feet which is the 28th consecutive quarter of positive net absorption. With demand outpacing new supply the vacancy rate decreased to 3.9 percent which is 30 basis points lower than Q3 2019.
The active industries during the fourth quarter include trade show and expo related companies, transportation and logistics, manufacturing, and e-commerce. The Las Vegas industrial market is expected to continue to be strong and help diversify and grow the local economy in 2020.