Northern Nevada
By Bob Shanahan, Colliers Reno
The Reno office market turned a corner in the third quarter of 2024. While many office markets across the country struggle with higher vacancies and subdued demand, Reno continues to buck this trend. The State of Nevada’s occupancy of numerous buildings as well as continued demand and takedown of space by other tenants in the Meadowood submarket resulted in strong net absorption. Sales activity has rebounded moderately, which may be a signal of investor confidence in office product. This, coupled with the potential for favorable interest rates in the coming months, portends continued momentum for the office market into 2025.
In Q3 2024, Reno’s office market vacancy rate fell 70 basis points quarter-over-quarter to 10.2%. This vacancy rate was 320 basis points below the pandemic-era peak of 13.4% as demand has remained steady. Available sublease space has declined 70% in the last 18 months. Quarterly net absorption of 51,777 square feet pushed year-to-date net absorption to 77,573 square feet. Strong leasing activity this year, combined with no new construction on the horizon, will stabilize market fundamentals through the end of the year. The State of Nevada leased another 26,000 square feet this quarter following the return to work announcement at the end of last year. Asking rents increased 1.6% during the quarter to $1.91 per square foot but were down slightly year-over-year.
Southern Nevada
By John Stater, Colliers Las Vegas
Office vacancy has increased for four consecutive quarters, reaching 12.1% in the third quarter of 2024. This is the highest vacancy rate recorded in southern Nevada since 2021. Southern Nevada had -31,744 square feet of net absorption this quarter. The weighted average asking rental for office space increased to $2.67 per square foot on a full service gross (FSG) basis. Macro office trends have not favored southern Nevada’s office market for the past year. Local trends involving business migration and government purchases of professional office buildings have only exacerbated those trends.
In the past two years, the valley’s office market has had only 6,882 square feet of total net absorption. The past five quarters have shown weak demand for office space after a fairly robust recovery from the 2020 lockdowns.
The third quarter has seen other inversions as well. Class A office, which has struggled in southern Nevada since the Great Recession, had strong demand in the third quarter. This renewed demand was likely due to the completion of several class A buildings over the past two years. Class B and C product, on the other hand, which thrived in the post-lockdown recovery, has suffered over the past two quarters. Year-to-date net absorption was only 2,573 square feet for class C office and was -356,151 for class B buildings.
We think Southern Nevada’s office market is either entering, or on the verge of entering a cycle of renewed recovery, and should post stronger numbers moving forward as it adjusts to these macro trends.
