Northern Nevada
By Reed Backstrom, Colliers Reno
Despite a slight decline into negative absorption in the first quarter, Reno’s office market demonstrated a modest recovery in the second quarter, indicating signs of stabilization and a return to positive demand. Submarkets with a larger inventory of Class A properties continued to experience growth in rents and an increase in tenant demand, while the broader market made greater concessions to attract tenants. The vacancy rate was recorded at 9.4 percent, consistently remaining within the low 9 percent range over the past four quarters. The sublease availability rate was noted at 0.4 percent, significantly lower than the 1.3 percent observed in Q2 2024, indicating a tightening supply in the market. Consequently, vacancies are expected to remain stable through year-end, with the likelihood that more tenants will pursue spaces in high-quality buildings.
Sales volume has been impacted by macroeconomic uncertainty, with the year-to-date average price at $258/SF, comparable to levels seen at the peak of 2022. The Federal Reserve, currently addressing an inflation rate that exceeds its 2.0 percent target, alongside a potentially cooling labor market, may consider a reduction in the federal funds rate. Anticipated rate cuts later this year could potentially stimulate investment activity.
Southern Nevada
By John Stater, Colliers Las Vegas
A major vacation of class C office space in the first quarter of 2025 sent net absorption into negative territory and increased vacancy to 12.1 percent. The weighted average asking rental for office space decreased to $2.63 psf on a full-service gross (FSG) basis. Net absorption remained negative this quarter, but minimally so, thus vacancy remained at 12.1 percent. This could indicate that the worst is over for Southern Nevada’s office market. Job growth in sectors traditionally associated with office space improved at midyear – a positive sign.
On the other hand, macro trends such as work-from-home and workforce efficiency (i.e. doing more with fewer), which could be exacerbated by Artificial Intelligence (AI), and this quarter’s performance might merely be a pause in the overall office trend. For now, the economics underlying demand for office space, coupled with those aforementioned macro trends, do not contribute to a clear picture of what is to come. Job growth is traditionally coupled with increases in occupancy, so we still think that net absorption will improve in the second half of 2025.
