Northern Nevada

By Jordan Lehman, Colliers | Reno

Reno’s office market saw a blend of market fundamentals in the fourth quarter of 2023 as investment activity rebounded, available sublease space shrunk, and net absorption continued to decline. After a slow start to the year, fourth quarter sales grew to $53.3 million. The sublease market contracted again this quarter as sublease space accounts for just 14.3 percent of all available space. Fourth quarter net absorption fell to nearly -25,000 square feet, pushing annual net absorption to roughly -23,000 square feet.

Northern Nevada saw robust job growth year-over-year with the addition of 7,600 jobs between November 2022 and November 2023. Reno’s unemployment rate fell 50 basis points since last quarter, down to 3.7 percent, though it is up 10 basis points year-over-year.

Reno’s sublease market reached a peak at the start of 2023, with more than 300,000 square feet of office space available for sublet in the first quarter. This wave of sublease space has largely subsided through the year and is less than half of its previous peak, falling to roughly 144,000 square feet by the end of 2023. Expect to see improving tenant demand in the new year.

Southern Nevada

By John Stater, Colliers | Las Vegas

After a less-than-stellar third quarter, southern Nevada’s office market bounced back in the fourth quarter of 2023 with 39,311 square feet of net absorption. New development was light and did not completely offset the several buildings in McCarran center that were purchased by the state of Nevada and thus removed from inventory. Vacancy increased to 11.1 percent from 10.9 percent one quarter ago. Asking rental rates increased to $2.57 PSF on a full-service gross (FSG) basis.

The challenges experienced by larger office markets in the United States since the lockdowns of 2020 appeared to now be impacting southern Nevada. While demand did not turn entirely negative in 2023, it softened significantly compared to 2022. Office users are coping with changes in their manpower requirements. This may merely be a transitional period that impacts demand for a few quarters or years, or it might signal a more permanent shift in demand for office product.

Possibly because of this trend, small office units outperformed larger office units through most of 2023, and it now appears landlords are more willing to divide larger spaces. Office design that encourages employees to work in the office and communications systems that help businesses remain flexible should be pursued both in new developments and when renovating older buildings.