Is Industrial Development Outpacing Demand in Las Vegas
A new report from Colliers International shows that industrial net absorption has been decreasing since 2017.
“Growth has primarily been in industrial properties—the big warehouse spaces—and in multifamily. The industrial activity dwarfs what we saw during the boom,” John Stater, research manager at Colliers, tells Globest.com. “Ecommerce is a big part of hit, but there is also an element of the growth of the city. It is becoming more prominent. When you have major sports teams opening up shop, people start looking Las Vegas as real city and not just an after thought to Southern California.”
While this is a clear sign that development is outpacing demand, Stater says that it is a minor problem. Developers are already naturally correcting the issue, and new constriction starts were also down in the fourth quarter. “I don’t think it is extremely serious. Development may be outpacing demand, but it isn’t outpacing it significantly to see vacancy rates jump,” he says. “We are starting to see new development slow down a little bit. Developers aren’t irrationally exuberant like they were in the boom, before the great recession.”
In addition, developers are starting to move into other industrial market segments with more limited supply. Light industrial and distribution will be more popular in 2020. “Developers are starting to diversify away from the bulk warehouse market into areas like light industrial,,” says Stater. “That market has had very low vacancy rates but very low development in the last few years.”
Next year, Las Vegas will follow the trends of the national economy. So, barring an economic disruption, Stater expects the Las Vegas market to continue growing. It will also continue to benefit from outward migration from surrounding states. “In terms of 2020, we are going to follow the national economy,” he says. “Las Vegas isn’t going buck any major trends. We do have some things to our advantage, like problems in California that are during more businesses here. Overall, if the national economy remains strong, the Las Vegas economy will remain strong.”