Northern Nevada
By Jordan Lehman, Colliers | Reno
Northern Nevada’s commercial real estate market experienced a shift in Q1 2023 with softening tenant demand, an uptick in sublease availability and a decline in investment sales. The region has seen continued growth in available sublease office space as tenants have added more square footage to the sublet market. Available sublet space accounts for 28 percent of all available space, up from 6 percent two years ago.
The market-wide vacancy rate ticked up for the first time since early 2021, growing 20 basis points quarter-over-quarter to 10.2 percent. Buyers and sellers have struggled to reach a middle ground due to weakened sale prices and interest rates. This has resulted in a decline in total office sales to just $8.8 million in the first quarter, down 81.5 percent compared to the quarterly average of the past three years. Moreover, pricing dipped to $217 per square foot, down 25.6 percent year-over-year.
Despite the blip of negative net absorption and growing vacancies, the region’s business-friendly policies remain attractive to companies looking to relocate. Although the market has seen shifting trends in investment and leasing activity, office market fundamentals should begin to stabilize by the end of the year.
Southern Nevada
By John Stater, Colliers | Las Vegas
Office demand rebounded in the first quarter of 2023, with net absorption hitting 200,980 square feet, attributable primarily to the completion of two large class A office buildings. Deliveries outpaced net absorption this quarter, increasing vacancy to 12.2 percent, from 11.9 percent one quarter ago. Asking rental rates increased to $2.50 per square foot on a full service gross (FSG) basis.
Demand for office space rebounded in the first quarter, with occupied square footage increasing by 200,980 square feet. Almost all positive net absorption this quarter was in class A space, primarily in the projects just completed. Class B and C properties have driven net absorption over the past three years, signaling potential weakness in the office market in 2023.
Owner/user sales volume remained fairly consistent this quarter with past quarters, while investment sales volume fell dramatically, falling 57.8 percent quarter-over-quarter and 69.5 percent year-over-year.
