Northern Nevada
By CBRE Reno
The Northern Nevada industrial market rebounded in Q1 2019. Twenty-eight lease transactions were signed during the quarter, leading to 880,914 square feet of positive net absorption and 1.1 million square feet of gross absorption. Of these, 24 deals were between 5,000 square feet and 100,000 square feet, demonstrating continued pressure on this segment of the market. This pressure has effectively caused a spike in rents, with a year-over-year asking rate increase of 9.3 percent.
The quarter posted solid absorption and demonstrated strong statistical market performance. Construction activity is robust, and the market expects over 2.9 million square feet of speculative construction to break ground by Q3 2019. The real headline, however, is that multiple independent, institutional portfolios of net-leased industrial assets are actively being marketed for sale. This market is historically characterized as “develop and hold” or “invest and hold,” so it is unique to have multiple portfolios of scale available across various asset classes in a single quarter. The available investment portfolios are also diverse, as they can collectively cater to many different types of investors.
The recent influx of investment opportunities speaks to the increasing value of industrial assets in the Reno market. Rental rates are steadily rising across almost all product types and classes, with flex space performing especially well. The lack of quality land sites increased offsite/onsite costs, and increased construction costs will keep upward pressure on rents for the foreseeable future.
Southern Nevada
By CBRE Las Vegas
The Las Vegas industrial market is in the midst of a seven-year expansion and is showing no signs of slowing. After a relatively strong 2018, the Las Vegas industrial market saw an exceptionally strong first quarter of 2019 with higher net absorption, an increase in new construction, and lower vacancy. Total net absorption during the quarter was more than 2.1 million square feet, which was, to a great extent, attributable to strong pre-leasing in the more than 1.7 million square feet of space that completed construction.
A few of the more notable completed projects include: Van Trust’s 855,000 square foot build-to-suit, Prologis’ Warm Springs Business Center totaling 212,578 square feet, Juliet’s building 6 at the Blue Diamond Business Center totaling 322,560 square feet and Harsch’s newest building at the Speedway Commerce Center totaling 332,800 square feet. Demand continued to outpace new supply, driven largely by wholesale, transportation, retail, and e-commerce companies. The increase in demand pushed the overall vacancy rate to a record low of 2.2 percent in the first quarter. To meet the increase in demand developers continue to break ground on new projects.
Currently there is 6.3 million square feet of space under construction with another 3.8 million square feet set to break ground in the next few quarters. Throughout the rest of 2019 the market will continue to see significant expansion and the new speculative developments will help alleviate the lack of available space for tenants looking to expand or move to Southern Nevada.
