Northern Nevada
By Jordan Lehman, Colliers | Reno
Reno’s office market experienced a mix of market fundamentals performance this quarter as it saw a notable decline in available sublease space and a continued slowdown in investment activity. For the first time since mid-2021, the total amount of available sublease space fell during the quarter. No longer more than twenty-five percent of all available space, the sublet market began to cool this quarter. Likewise, quarterly investment sales have been a fraction of totals from prior years. The bulk of recent office transactions have been owner-user sales.
Northern Nevada has seen strong job growth in the last year as Reno added 8,700 jobs since May 2022. Reno’s unemployment rate fell to 4.1 percent in May, down 40 basis points since the start of the year.
Office users in the region are still navigating plans for their future office needs as many tenants have opted to sign short term leases and renewals, hoping to find the office sweet spot. Developers will likely remain hesitant to break ground on speculative construction as material costs remain incredibly high and future tenant demand is uncertain in northern Nevada.
Southern Nevada
By John Stater, Colliers | Las Vegas
Southern Nevada’s office market remained healthy at midyear 2023. Net absorption increased to 315,603 square feet in the second quarter of 2023. With no new office buildings completed during the quarter, that strong net absorption sent vacancy down to 11 percent from 11.7 percent one quarter ago. Asking rental rates remained at $2.50 per square foot (PSF) on a full service gross (FSG) basis.
The health of southern Nevada’s office market in 2023 bucked the trend in major American cities, and may be due to a renewed interest in mid-tier cities by office users, a generally strong local economy and the type of tenants that dominate the local market.
The question now is how the national economy will fare in the second half of 2023. Should it remain healthy, southern Nevada may well look back at 2023 as one of its best years ever. If the national economy does fall into recession, southern Nevada at least can take solace in entering the recession with momentum.
