(To read more on the industrial market, click here.)
LAS VEGAS-The Las Vegas Valley saw 1.5 million sf of new industrial deliveries offset by 2.1 million sf of absorption during the third quarter, pushing vacancy down to 3.4% from 4.1% at the start of the quarter, according to new market report released by locally based Applied Analysis. The market's lowest recorded vacancy rate, 3.3%, came earlier this year at the end of the first quarter.
"We continue to witness accelerated demand for distribution space and freestanding buildings in the industrial sector as many end users may be seeking out more space than they require today given longer-run availability concerns," says Applied Analysis principal Jeremy Aguero.
Through the first nine months of the year, 4.5 million sf of industrial space has been added to the Las Vegas Valley industrial market and 4.3 million sf has been absorbed. As of Sept. 30, the industrial market consisted of 87.5 million sf in 2,733 buildings, with 4.8 million sf under construction and another 5.7 million sf planned fur future development.
"Our estimate of forward-looking supply, which includes under-construction and planned projects, appears to have reached a plateau during the third quarter, suggesting this may be the final wave of sizable industrial development within the Las Vegas urban core," says Aguero's partner at Applied Analysis, Brian Gordon. "Land availability at financially feasible prices remains a concern for new entrants to the sector."
With demand keeping pace with new supply, rental rates have continued to rise, according to the report. As of the third quarter, average asking rates were $0.74 per sf per month. That average is 10.1% higher than the end of June, when the average asking rate was $0.67, and 17.5% higher than one year ago.
Directly affecting rental rates are rising land and construction costs. To offset these items, developers are increasing densities in their developments. As it has elsewhere around the nation, Aguero says multi-tenant, for-sale products have proven successful for many. In addition, he says "multi-story and mixed-use industrial products are no longer outside the realm of reasonableness."
By product type, the lowest vacancy rate at the end of the third quarter was the R&D sector at 1% while flex space posted the highest vacancy at 5.5%. By location, the lowest industrial vacancy, 3.0%, was in unincorporated Clark County, where the average asking rate stands at $0.81 per sf per month, up more than 10% from this time last year. The submarket with the highest vacancy, 5.4%, is the City of Las Vegas, where the average asking rate is now $0.83 per sf per month, down 20% from this time last year when the asking rate was $1.03.
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