Southern Nevada
Las Vegas Valley’s office vacancy rate in Q2 2017 declined by 1.1 points to 19.2 percent from Q1 2017. Compared to Q2 2016, the office vacancy rate was down 1 point, from 20.2 percent. Vacancy rates ranged from 15.7 percent for Class C space to a high of 23.3 percent for Class A space in Q2. Las Vegas Valley’s office vacancy rate in Q2 2017 declined by 1.1 points to 19.2 percent from Q1 2017. Compared to Q2 2016, the office vacancy rate was down 1 point, from 20.2 percent. Vacancy rates ranged from 15.7 percent for Class C space to a high of 23.3 percent for Class A space in Q2.
There were no office completions in Q2. In the last 16 quarters, 13 quarters have seen new space come to market. However, in the prior 15 quarters, only three quarters saw new completions. This suggests that the market has been improving and there is growing demand for space of a certain quality.
As the vacancy rate declined, net absorption improved from the previous quarter as well with +465,600 square feet. On a year-over-year basis, net absorption was at +676,900 square feet. Of the four product types, only one saw negative absorption during the quarter, with Class C experiencing a drop of -56,900 square feet. Class A and Class B led in absorption with +241,200 square feet and +240,600 square feet, respectively. Medical Office saw smaller, but positive, gains with +40,700 square feet of absorption.
At the end of Q2, two projects were under construction in the office market: Sunset Hills Plaza, a 10,000 square foot office building (Class C) and Jones Beltway Business Park, a 16,480 square foot building (Class B). The amount of planned space declined from the previous quarter and now stands at 566,300 square feet.
Northern Nevada
Headline announcements for Q2 office involve high-tech manufacturing and international distribution companies while the inbound wave of software development, bio-research and R&D companies remains still. The two largest lease transactions of the quarter were Centene Corporation, a multi-line healthcare program and services provider, and the Nevada State Contractors Board. Both signify the continuing trend in the growing healthcare services and construction industries. Headline announcements for Q2 office involve high-tech manufacturing and international distribution companies while the inbound wave of software development, bio-research and R&D companies remains still. The two largest lease transactions of the quarter were Centene Corporation, a multi-line healthcare program and services provider, and the Nevada State Contractors Board. Both signify the continuing trend in the growing healthcare services and construction industries.
The quarter over quarter vacancy rate dropped to an overall 12.49 percent, down from 12.62 percent. The Meadowood and downtown submarkets continue to lead with falling vacancy rates. This trend reflects the healthy shortage of Class A space and has encouraged occupiers to consider alternative submarkets, such as the airport. The airport submarket has fallen below 11 percent vacancy.
Class A lease rates continue to escalate reaching $2.30 per square foot, per month, full service gross, for second and third generation spaces. Class B and C rates are stagnant fluctuating between $1.20 and $1.70 per square foot, per month, full service gross.
Suburban office building owners and developers create plans to entice a younger workforce with amenities such as social clubs, fitness rooms, roof top gardens and more. Some have coined this as suburban-urbanization of the office building. It is a cultural improvisation to a real estate sector that will compete with the success of downtown office building modernization.
Southern Nevada analysis and statistics compiled by RCG Economics, Northern Nevada analysis and statistics compiled by Dickson Commercial Group.
