Northern Nevada
By Jordan Lehman, Colliers | Reno
Northern Nevada’s office market experienced some positive market fundamentals this quarter as it saw declining net absorption, shrinking sublease availability, and improving investment activity. Quarterly net absorption of – 5,474 square feet pulled annual net absorption to about 1,800 square feet. Available sublease space declined again this quarter and is no longer a large portion of all available space in the market. Quarterly sales reached $21.4 million in Q3, pushing annual sales to nearly $43.0 million in 2023.
Northern Nevada has seen strong job growth this year, with Reno gaining 2,300 jobs in September, and a total of 8,900 jobs year-over-year. Reno’s unemployment rate rose slightly to 4.5 percent in August, up 80 basis points year-over-year.
Reno’s numerous sublease availabilities continued their decline this quarter as available sublease space accounted for less than 14.0 percent of all available space in the market. A few master leases have expired this year, changing sublet vacancies to direct vacancies, and lowering the amount of empty sublet suites in the market. Many subleases have also been signed this year, indicating encouraging pockets of tenant demand in northern Nevada.
Southern Nevada
By John Stater, Colliers | Las Vegas
Southern Nevada’s office market took a downturn in the third quarter of 2023, with net absorption decreasing to -364,059 square feet. No new office buildings were completed during the quarter, but several buildings in McCarran center were purchased by the State of Nevada, thus removing them from inventory. Vacancy increased to 11.1 percent, from 11.0 percent one quarter ago. Asking rental rates remained at $2.52 PSF on a full service gross (FSG) basis.
The trend of demand for smaller office units continued into the third quarter, with most of the Valley’s increased vacancy being located in units sized larger than 5,000 square feet. Most of the Valley’s occupancy losses occurred in the older East Las Vegas and West Central submarkets, again continuing a longstanding trend.
What this comes down to is that, overall, the trends that have driven the market for several years remain in play. The difference this quarter is a decrease in overall office demand. How quickly this downturn in demand will last is difficult to predict, since it cannot be linked directly to a degrading employment situation.
