Monster's new distribution center is located at 3817 Bay Lake Trail, within Las Vegas Corporate Center in North Las Vegas. CBRE broker Donna Alderson, who represented Monster, says the negotiated lease rate is a market rate for that size of a lease in the North Las Vegas submarket. "That is an extremely large tenant for our market," Alderson says. "That is why the lease rate was so competitive."
The Valley-wide vacancy rate for warehouse/distribution space ended the year at 4.4% (1.77 million sf) and the average triple-net asking rate for such space was about $0.63 per sf per month. With an asking rate in the low $0.50s per sf per month, North Las Vegas is the least expensive submarket in the region for warehouse/distribution space. Near McCarran International Airport at the south end of the Las Vegas Strip, the average triple-net asking rate for warehouse/distribution space is more than $1 per sf.
Speaking specifically about the warehouse/distribution market, Alderson says there continues to be a healthy supply and consistent demand. "Demand for the small, for-sale stuff has softened up quite a bit as lending requirements have tightened but the warehouse-distribution market has held up," she says. "Demand has softened up a little bit, but there is still solid activity in that product type."
The overall Las Vegas industrial market expanded by seven million sf in 2007 to 96.4 million sf, according to Applied Analysis. Net absorption was 4.4 million sf. The 2.6-million-sf difference between supply and demand pushed up the average vacancy rate to 6% at the end of the year from 3.5% at the end of 2006. At the start of 2008, an additional 4.7 million sf was under construction. Manufacturing posted the lowest vacancy rate, at 4.5%, while Flex space posted the highest vacancy rate, 7.1%.
"As the overall economic climate continues to cool and residential development activity has reversed course from the highs reported two and three years ago, development opportunities in the industrial sector have emerged in force," says Applied Analysis principal Jeremy Aguero. "This is not to suggest an oversupply condition exists, but rather a more balanced mix of activity is likely to prevail, coming off a period of record low vacancies. We expect vacancies to remain below historical averages and settle in the mid to high single-digits in the coming year, while pricing for industrial product will not likely retreat."
ProLogis dramatically increased its ownership in the Las Vegas market and Nevada in general last year when in partnership with Lehman Bros. it acquired a 24.7-million-sf portfolio from Dermody Properties and CalSTRS for $1.8 billion. With more than 60% of the portfolio in Nevada, the deal instantly gave ProLogis a leading position in the state.
The deal included 12 million sf in the Reno area and four million sf in the Vegas area, including one million sf within Las Vegas Corporate Center, taking its ownership there to 2.5 million sf in 12 buildings. ProLogis says its only availability at Las Vegas Corporate Center is the remainder of the 500,000-sf building in which Monster Cable will be located.
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