Northern Nevada
By Angel Orozco & Dan Buhrmann, CBRE
The Reno industrial market turned in healthy market fundamentals in Q1 2022, posting the tenth consecutive quarter of positive net absorption. Vacancy decreased quarter-over-quarter, closing Q1 2022 at 0.7 percent, the lowest on record. Availability rates followed suit, dropping to 1.7 percent.
Average asking lease rates reached an all-time high, posting a rate of $0.80 NNN. The significant increase of asking lease rates was generated by high-rate flex product that is currently left in the market. Leasing velocity continued to soar, leading to 2.7 million sq. ft. of net absorption in Q1 2022. With over 3.5 million sq. ft. of gross leasing activity, the Reno Industrial market is set to see strong absorption figures as pre-leased speculative projects deliver in 2022 and 2023. Industrial sales activity in the market remained active in Q1 2022. The largest building sold this quarter was a 38,657 sq. ft. investment sale at 280 Greg St. for $7.9 million.
Reno welcomed over 1 million sq. ft. of new industrial product to the market in Q1 2022. The Reno construction pipeline remains robust with 13 projects totaling over 4.5 million sq. ft. of product currently under construction. Despite prolonged construction due to supply chain disruptions, notable pre-leasing activity of new construction will produce substantial net absorption throughout the balance of the year.
Southern Nevada
By Cassie Catania-Hsu, CBRE
After a record-breaking 2021, the Las Vegas industrial market is showing indications for a strong 2022. Net absorption totaled about 3.1 million sq. ft. for the first quarter, a record high for a single quarter, breaking the previous quarterly record set during Q2 2021. The overall vacancy rate decreased to a new record low of 1.1 percent quarter-over-quarter. The monthly average asking lease rate continued to climb, with a 6.1 percent increase from Q4 2021.
Much of the Q1 2022 total absorption was due to high pre-leasing in projects delivered during the quarter. The North Las Vegas submarket saw nearly 1.6 million sq. ft. of net absorption. The Henderson submarket reported over 828,000 sq. ft. of net absorption, and the southwest submarket saw about 370,000 sq. ft.
Tenant demand continued to outpace supply. However, 13 million sq. ft. of projects are underway and will deliver in the next 12 to 18 months. That level of deliveries should help balance the supply and demand. Nearly 5.2 million sq. ft. of projects started construction during Q1 2022, all of which was speculative developments (built without signed leases). Over the last 12 months, over 7.5 million sq. ft. of space was added to the Las Vegas industrial market. New deliveries totaled 2.6 million sq. ft. in Q1 2022, with 86% of that space pre-committed. Looking forward, pre-leasing is expected to remain high for the next year as new space is delivered.
