Reno/Sparks saw office vacancy increase in the third quarter of 2020 to 10.8 percent as net absorption turned negative. There were no new completions of office space during the quarter. The average asking rate for office space increased slightly, to $1.84 per square foot (PSF) on a full-service gross (FSG) basis from $1.83 in the second quarter of 2020.
Given the serious disruptions experienced by the local and national economies in 2020, the generally positive performance of the Reno/Sparks office market was unexpected. Unfortunately, the region’s economic woes caught up in the third quarter, as decreased demand for office space produced negative net absorption.
Reno/Sparks office vacancy has struggled to dip below 10 percent, managing it in the fourth quarter of 2019 and again in the second quarter of 2020. Office vacancy was likely to continue decreasing in 2020, had there been no business closures. As it is, the office market has not suffered as deeply as it did during the Great Recession, and the improving economy should get the region back on the right track in 2021.
Job losses and economic disruption have begun registering in southern Nevada’s office market, with net absorption decreasing to negative 233,279 square feet in the third quarter of 2020. That sent the vacancy rate up to 13 percent, higher than one year ago.
The weighted average asking rate for office space remained at $2.21 per square foot (PSF) on a full-service gross (FSG) basis for the third consecutive quarter.
As the job picture improves, demand for office space should improve along with it, although perhaps not at the rate experts might have expected a year ago.
The office market is sailing into significant headwinds due to pandemic-related restrictions and the increased possibility for employees to work from home. The picture for this submarket is expected to improve in 2021, but it could take until 2022 for the market to make up the ground it has lost in 2020.