Northern Nevada
By Angel Orozco, CBRE
The Reno Industrial market finished Q1 2023 with strong market fundamentals, posting the 14th consecutive quarter of positive net absorption. Reno continues to be one of the most active development markets in the country due favorable tax haven and proximity to all Californian markets.
Market-wide vacancy and availability rose slightly in Q1 2023. The vacancy rate increased 140 basis points (bps) to 2.5 percent and the availability rate followed suit, increasing 160 bps to 3.7 percent. Average asking lease rates closed the quarter at $0.93 NNN. Leases exceeding 100,000 SF continue to yield high rents. However, leases under 100,000 have shown a mild reductions in lease rates.
The Reno market closed out Q1 2023 with a total of 1.1 million SF of net absorption, maintaining the market’s robust occupancy growth. Q1 2023 demonstrated a bifurcated market with a strong influx of bulk tenants and a modest decrease in flex space users. Industrial sales activity in the Reno market continues to remain bleak due to the current rate hikes by the Fed.
Reno delivered ten new industrial buildings totaling 2.5 million SF in Q1 2023. The construction pipeline remains plentiful, with a variety of projects totaling over 7.8 million SF currently under construction and 13.9 million SF in various planning stages.
Southern Nevada
By Laura Wilhelm, Garrett Toft and Kelsey Higgins, CBRE
After a strong 2022, the Las Vegas industrial market experienced continued tenant demand and robust preleasing levels during the first quarter of 2023, resulting in an overall vacancy rate of 1.4 percent. Two million SF of industrial product was completed in the first quarter, 98 percent of which was preleased, surpassing Q4 2022’s rate by 24.8 percentage points. Although several submarkets experienced nominal negative net absorption this quarter, the market as a whole achieved 1.8 million SF of positive net absorption.
The overall vacancy rate remained largely unchanged from last quarter, increasing only by 0.1 percent. The Henderson and North Las Vegas submarkets remained the tightest, with vacancy rates of 0.7 and 1.1 percent, respectively. Construction activity continued throughout the Las Vegas industrial market during the first quarter, with 16.8 million SF currently under construction and 3.0 million SF breaking ground in Q1. Large distribution space remained the most in-demand. However, requirements for smaller spaces in properties less than 100,000 SF continued to gain momentum throughout the Valley.
Although market fundamentals remain strong, the capital markets are not as receptive to speculative industrial development, which will prompt many developers to pause future planned projects. A sustained low vacancy rate and firm lease rates will be essential for continued market growth and development.
