By CBRE Reno
The northern Nevada industrial market has been resilient in the wake of the COVID-19 pandemic as market fundamentals remained strong in Q3 2020. After impressive net absorption totals in the second quarter, Q3 posted healthy figures with 855,106 square feet of positive net absorption, pushing the year-to-date net absorption total past 3 million square feet.
Total transactional activity during the quarter accounted for 1.3 million square feet, primarily occurring in the central/airport and north valleys submarkets. Increased tenant demand for large blocks of distribution space was highlighted by several significant leases signed in the two submarkets. Although activity in the market continues to gain momentum, the vacancy rate climbed to 4.2 percent in Q3. This rise can be attributed to several Class C vacancies (located in the flood zone) under 50,000 square feet that were brought to market this quarter, mainly in the Sparks submarket.
Construction completions were moderate for the quarter as two build-to-suit distribution buildings delivered for a total of 606,363 square feet. Developers continue to be bullish on the future of the region as 3.1 million square feet of speculative developments are currently under construction. Following the summer’s wave of COVID-19 cases that restrained economic activity in July, key indicators from CBRE Econometric Advisors suggest activity rebounded in August and into September.
Despite the COVID-19 induced economic downturn, the Las Vegas industrial market continued to maintain steady activity in the third quarter resulting in more than 1.4 million square feet of net absorption—the 31st consecutive quarter of positive net absorption.
To meet the increasing tenant demand, developers added 878,219 square feet of new space during the third quarter, bringing the year-to-date total to more than 3.6 million square feet.
Noteworthy completions for the quarter include the 266,560-square-foot South15 Airport Center C-D, and the 174,313 square foot Blue Diamond Interchange Center 1. Developer confidence in the market continues to be strong as evident of the nearly 3 million square feet of space that broke ground during the third quarter, compared to the 750,000 square feet in the second quarter. A few of the significant projects that broke ground include CapRock Tropical Logistics 1-2, totaling 1.3 million square feet, and Silver State Commerce Center 1-3, totaling 834,944 square feet.
The overall vacancy rate continued to be at near-record lows at 3.4 percent. The North Las Vegas submarket saw the most significant over-the-quarter change in vacancy decreasing 120 basis points from 5.3 percent to 4.1 percent. The industrial market continues to out-perform forecasts, and if current leasing activity holds the market may not post any negative absorption in this downturn, unlike the seven consecutive quarters of negative net absorption during the great recession.