Southern Nevada
The Las Vegas industrial market vacancy rate fell to 14.8 percent in the third quarter of 2013, which is the lowest it has been since the first quarter of 2010. Compared to the prior quarter (Q2 2013), vacancies are down 70 basis points (0.7 percentage points), while they have fallen 220 basis points (2.2 percentage points) since last year (Q3 2012). Since the end of 2011, vacancies are down 2.7 percentage points (from 17.5 percent) as a result of seven consecutive quarters of positive net absorption.
Two projects totaling 352,000 square feet completed construction during the third quarter, bringing total inventory to 107.1 million. Approximately 130,000 square feet was sourced to SHFL Entertainment’s new headquarters. In addition, the United Brotherhood of Carpenters completed its 222,000-square-foot expansion at its training facility near McCarran International Airport.
The market reported approximately 1.1 million square feet of positive net absorption during the third quarter, bringing the year-to-date total to positive 3.0 million square feet. During the quarter, a number of significant lease transactions took place. Organo Gold International signed a lease for 111,000 square feet in Pacific Business Center in Henderson, while Hand Air Express signed a deal for 67,600 square feet in ProLogis Sunrise Industrial Park. In addition, EBC Brakes USA and OSA West signed deals for space in KTR Capital Partners’ Arrowhead Commerce Center. EBC Brakes will occupy 65,300 square feet, while OSA West leased 56,700 square feet.
Construction activity fell slightly to 1.3 million square feet by the close of the third quarter. A handful of projects continued to move forward during the quarter, including: the Shetakis Wholesalers expansion (65,600 square feet), VadaTech (70,000 square feet), Konami Gaming (193,400 square feet), FedEx at South 15 Airport Center (296,000 square feet) and Switch MegaNAP 9 (525,000 square feet). Additionally, Nicholas & Company broke ground on its 182,900-square-foot distribution center in North Las Vegas.
Northern Nevada
To the relief of all but the tenants negotiating for space, the third quarter played out even better than expected. It will be difficult to carry this momentum with limited inventory but nonetheless all signs are bullish.
A total of 48 transactions were completed in Q3 2013 with a gross absorption of 2,401,938 square feet, almost two and a half times above the five year average and almost double last year. The average transaction size was up 66 percent from the five year average to 50,040 square feet. Large transactions for the quarter included Ardagh Group’s 330,000 square feet purchase, Fed Ex 274,000 square feet lease, Key Logistics 271,152 square feet lease, Myers Industries 189,000 square feet owner, Pacific Western Timbers 176,000 square feet lease, Genco 102,000 square feet lease and South\Win’s West Coast operation lease of 100,160 square feet.
Net absorption for the quarter was nearly a record at 1,814,680 square feet, almost six times higher than the same quarter in 2012. Rental rates are beginning to see upward pressure and vacancy, at 10.5 percent, is lower by more than 300 basis points from the beginning of the year. The market seems to have balanced all in one short quarter. When accounting for pipeline activity and no “give backs” on the horizon vacancy is expected to drop below 10 percent at the end of the year.
Land is also getting attention as developers cautiously strategize for construction. One developer is nearing completion of 524,800 square feet in the Tahoe Reno Industrial Center and another has closed on a 91 acre site in North Reno and already begun excavation for a 624,000 square feet speculative building.
Both Northern Nevada developers and brokers remain optimistic and the key factor under consideration is timing. Before building, developers are cautious about having a prospect in tow. On the other hand tenants looking for space want it ready to go now. On the whole, it makes for a good and safe situation which will reduce the likelihood of overbuilding in the future.
Southern Nevada analysis and statistics compiled by Applied Analysis, Northern Nevada analysis and statistics compiled by NAI Alliance Reno
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