By Angel Orozco & Dan Buhrmann, CBRE
The Reno industrial market finished the quarter with strong market fundamentals, posting the eleventh consecutive quarter of positive net absorption. Record low vacancy and availability rates, along with the rise of pre-leasing activity continues to entice both local and national investors. Average asking lease rates increased 53.4 percent year-over-year, ending the quarter at a record high at $0.89 monthly, per sq. ft., NNN. On the supply side, over 1.7 million sq. ft. of product was delivered to the market with a record 8.9 million sq. ft. currently under construction.
Vacancy and availability rates continued to meet record lows in Q2 2022. The vacancy rate decreased 20 bps since Q1, closing the quarter at 0.5 percent, the lowest on record. Availability rates followed suit, dropping 40 bps to 1.3 percent. The Reno market closed out the Q2 quarter with a total of 2.3 million sq. ft. of net absorption, maintaining the market’s healthy leasing transactions. As pre-leased projects are expected to be delivered in 2022 and 2023, the Reno industrial market is set to experience strong absorption figures well into next year. Industrial sales activity in the Reno market remained active in Q2 2022.
Reno welcomed over 1.3 million sq. ft. of industrial product in Q2 2022 and six projects are projected to start in Q3, totaling over 3.6 million sq. ft. The Reno market continues to experience changing completion dates due to supply chain constraints.
Laura Wilhelm, Cassie Catania-HSU and Garrett Toft, CBRE
For the first time in the market’s history, the overall vacancy rate dropped below 1 percent, with a 96 percent prelease rate in projects that delivered during the quarter. Additionally, there was a 6.7 percent quarter-over-quarter increase in average asking lease rates, from $1.04 to $1.11 per sq. ft., NNN, another new record high. Overall net absorption totaled nearly 2.1 million sq. ft., bringing YTD net absorption to 5.2 million sq. ft. While the pace of leasing and rental appreciation has been record setting, continued strong preleasing will be required in order to balance the future supply of industrial product set to deliver through EOY 2023.
Nearly 1.7 million sq. ft. was delivered during Q2 2022, bringing the year-to-date total to 4.2 million sq. ft., 90 percent of which was preleased. In addition, over 2.3 million sq. ft. broke ground during the quarter, nearly all of which occurred in the North Las Vegas submarket. About 90 percent of those projects consisted of buildings greater than 100,000 sq. ft. Demand also continued for smaller, multi-tenant inventory, as over 1.4 million sq. ft. of space under construction included buildings below the 100,000-sq. ft. threshold.
Although economic conditions have softened over the last three months, it remains to be seen what impact that will have on the market longer term. The industrial land scarcity has led many developers to consider developing in the Apex Industrial Park, Sloan, Jean and El Dorado Valley.