"The Las Vegas industrial market continues to be impacted by a declining economic climate, elevated fuel pricing for regional distributors, and increased caution on the part of business decision makers," he says. "Company expansions and relocations are much more limited today than any point during the past five years. This prudence is having a measurable impact on leasing and sales activity within the industrial sector."
The market posted 695,000 sf of net absorption in the second quarter – meaning that much more space was leased than was vacated during the quarter – but was offset by 1.5 million sf of new construction deliveries that came online more vacant then the market average, according to the report. As a result, vacancy increased 60 basis points from 7.1% in the first quarter. Through the first half of the year, net absorption totaled 1.5 million sf while new deliveries totaled 3 million sf. The market's industrial inventory now totals just approximately 100 million sf.
The market's overall 7.7% vacancy rate is currently in line with the market's 10-year historical average but Aguero is predicting it will rise flirt with double digits by the end of the year given the 2.6 million sf of industrial space currently under construction. The amount now under construction is the lowest level in four years, which shows that developers have temporarily halted projects not yet under construction to allow more time for demand to catch up given current economic conditions.
"New supply during the last 12-months remains near a record pace, while the amount of space under construction reflects a more normalized rate of activity," Aguero says. "We expect demand to moderate in the near-term, while project completions will slow, limiting the upward potential for a material increase in vacancies.
"By the close of 2008, industrial vacancies are projected to be in the 9-percent range and speculative lease rates are projected to see no growth in the short-run. The for-sale market for freestanding buildings has been more impacted as speculative investment activity has buyers carrying pricing premiums relative to ground-up developer projects. Overall, it is likely the industrial real estate sector will be less impacted by current economics than other segments, including the office and retail market. That said, expecting that the industrial market will be unscathed is overly optimistic."
The industrial product type with the lowest vacancy rate in the Las Vegas Valley is manufacturing space, which posted a Q2 vacancy rate of 6.2%, according to Applied Analysis. Flex space posted the highest overall vacancy rate at 9.8%. Distribution came in somewhere in between. Average asking lease rates were $0.68 per sf per month for distribution, $0.91 for manufacturing and $1.08 for flex space.
Earlier this month, Panattoni retained CB Richard Ellis to sell a 2.02 million-sf portfolio of Nevada industrial buildings. The Las Vegas piece of the deal is two buildings totaling 267,500 sf in the Cheyenne Industrial Center in Las Vegas. Approximately 70% of the portfolio's square footage is located in the Lear Industrial Center, which sits within the Cheyenne Industrial Center in Reno, NV. For that story, click here.
Want to continue reading?
Become a Free ALM Digital Reader.
Once you are an ALM Digital Member, you’ll receive:
- Breaking commercial real estate news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical coverage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
*May exclude premium content© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
