Northern Nevada
By Jordan Lehman, Colliers | Reno
Reno’s office market saw continued positive net absorption, decreased investment sales and an uptick in sublease availability in the fourth quarter of 2022. Fourth quarter net absorption of nearly 32,000 square feet pushed annual net absorption to almost 129,000 square feet. Though the region has tallied six consecutive quarters of positive demand, quarterly net absorption started to trend downward this year as direct and sublet space have returned to the market. With $42.1 million in fourth quarter sales, annual sales totaled $192.9 million.
While many larger markets suffered from a flood of sublease availability shortly after the onset of the pandemic in 2020, the Northern Nevada market avoided the wave for more than a year. Only in 2022 did the office market really start to see an increase of sublet space. At the end of the year, available sublease space accounted for 23.1 percent of all available space, up 7.0 percent a year earlier. As more and more tenants choose to return portions of their office footprints, many other office users have seized the opportunity to occupy space that had not been vacant for some time. So far, tenant demand has been strong enough to outweigh the growing list of sublease availabilities, keeping net absorption positive. However, if new sublease space starts to outpace demand, Reno could face a challenging office market in 2023 and beyond.
Southern Nevada
By John M. Stater, Colliers | Las Vegas
Demand for office space in Southern Nevada remained consistently strong in 2022, with the exception of the last quarter of the year. The fourth quarter saw several large class B office suites released to the market, dampening an otherwise stellar year.
Even with the release of class B space onto the market, Southern Nevada had 881,326 square feet of net absorption in 2022. Demand for office space in 2021 and 2022 amounted to a combined 1.8 million square feet of net absorption, lower than the combined 2.5 million square feet of net absorption in 2017 and 2018, but significantly stronger than during 2019 and the lockdown year of 2020.
With office vacancy now 11.9%, a decade low, it is safe to say that the market has fully recovered from the lockdown recession of 2020, and is now ready to expand. There are currently 628,723 square feet of office space under construction in the valley, and 797,410 square feet scheduled for completion in 2023.
Healthy vacancy and increased development are good signs for Southern Nevada’s office market, which suffered greatly during the Great Recession. The possibility of recession in 2023 and the lackadaisical performance of the market at the close of the year make us hesitant to predict a strong year ahead, but a heathy 2023 is not out of the question.
