By CBRE Reno
As the COVID-19 pandemic unfolded in Q2 2020, it delivered a widespread shock to the U.S economy. While it is too early to fully comprehend the long-term impact the pandemic will have, industrial real estate has emerged well positioned to weather the current economic climate. The Reno industrial market finished the quarter strong after an initial pause in activity with 1.3 million sq. ft. in positive net absorption. Substantial leasing activity accounted for 1.8 million sq. ft. in gross absorption across the market as several large leases were signed.
Steady transactional activity and demand for large blocks of bulk space pushed the market wide vacancy rate down to 3.6 percent during Q2 2020. The Sparks submarket saw its vacancy fall by 50 basis points while the East Valley submarket saw the largest drop quarter over quarter as its vacancy rate fell from 7.6 percent to 4.3 percent. The submarket has been a hotbed for industrial leasing activity over the past few quarters and several new developments in the area are looking to meet the demand.
Construction activity in the Reno market is continuing to grow as the total number of sq. ft. currently under construction reached 2.5 million. Q2 2020 was a testament to optimism from developers as 1.1 million sq. ft. of new construction broke ground. Pre-leasing continues to be a central theme in the market as tenants look for opportunities to secure space prior to completion.
The Las Vegas industrial market continued to show its resiliency in the second quarter of 2020, even amidst the economic uncertainty related to the COVID-19 pandemic. Strong tenant demand for new and larger industrial space contributed to 1.7 million sq. ft. of net absorption causing the overall vacancy rate to decrease to 3.4 percent. Developers added more than 1.4 million sq. ft. of new space during Q2 2020 bringing the year-to-date total to 2.8 million sq. ft. The Las Vegas industrial market has been among the fastest growing markets in the U.S. and is in the eighth year of expansion. During the current market cycle developers have added more than 27 million sq. ft. of new space. Despite adding a significant amount of space, demand has outpaced new supply with more than 34.5 million sq. ft. of total net absorption.
Over the past several years Las Vegas has been identified as an ideal location for large scale regional distribution hubs particularly from e-commerce and traditional retail companies. The largest lease of the quarter was Ruby Has, an e-commerce fulfillment company, signing a 373,363 sq. ft. lease at Clarion Partners’ newly constructed North15 Logistics.
CBRE brokers report that the pipeline of tenants currently looking into the Las Vegas industrial market continues to be strong supporting continued growth with new construction and positive absorption through the end of 2020.