By CBRE | Reno
The northern Nevada industrial market continued to post strong market fundamentals in Q3 2021. Net absorption for the quarter reached 1 million SF, representing the ninth quarter in a row where net absorption totaled more than positive 800,000 SF. The market wide vacancy rate continues to plummet, ending Q3 2021 at 2.1 percent, down 120 basis points (bps) from Q1 2021. Low vacancy rates have made it harder for tenants to find quality existing space, causing many to seek out build-to-suit projects or prelease new construction.
Leasing activity remains strong in Q3 2021 with a total of 1.6 million SF of leases being signed and the average deal size remaining strong coming in at just under 100,000 SF. Distribution, logistics and manufacturing occupiers are the most active in leasing large blocks of space as shown in this quarter’s top deals. Sales activity in Q3 2021 remained active as 519,687 SF of product traded hands.
There is a record 5.8 million SF of active industrial developments underway and approximately 1.2 million SF broke ground in Q3 2021 in McCarran and Spanish Springs.
As new industrial developments deliver, net absorption will rise in the coming quarters due to the substantial amount of pre-leasing in the market. There are signs of geographic growth in the market as existing developers and new to the market developers are buying large sums of land to develop in the upcoming years.
The Q3 2021 marked the 35th consecutive quarter of positive net absorption in the Las Vegas industrial market. More than 2.5 million square feet of space was occupied by tenants and users during the quarter, bringing the year-to-date total net absorption to more than 8 million SF – on pace to eclipse the previous annual record of 8.2 million SF in 2017. The North Las Vegas submarket continued to see the strongest demand with more than 76 percent of the total net absorption in the third quarter.
To meet the increasing occupier demand, developers continue to construct new space at record pace. At the end of the third quarter more than 2 million SF of projects completed construction with 97 percent of the space preleased. The construction pipeline continued to expand in the third quarter with developers breaking ground on 4.3 million Sf of projects bringing the total space under construction to 12.3 million SF, with more than half of the space under construction preleased.
Strong preleasing activity and continued user demand put downward pressure on the overall direct vacancy rate decreasing to 2.4 percent, the lowest rate since the second quarter 2019. This year is shaping up to be the strongest year on record for the local industrial market, which has been essential in bringing new industries to southern Nevada and diversifying the local economy.