Active New Construction Pipeline Is No Match for Las Vegas Demand

Las Vegas’ industrial market is having a moment. Thanks to a wealth of drivers—from increased population growth to outward migration from California—Las Vegas has seen a dramatic upswing in demand from industrial users and a robust new construction pipeline. Since 2019, more than 10 million square feet of new industrial supply has delivered into the market, but the new demand has kept pace with supply.

The Las Vegas industrial market has added over 10.7 million square feet to its inventory since the start of last year with 6.6 million square feet delivered in 2019 and 4.1 million square feet delivered in 2020 year-to-date,” Alma Cuevas, director at Cushman & Wakefield, tells GlobeSt.com. “And with 6.3 million square feet currently under construction as of November 2020, compared to our 10-year average construction activity of 2.6 million square feet, new development remains strong in Southern Nevada with significant leasing activity on much of the planned and under construction inventory. “

During the pandemic, leasing activity hasn’t waned. So far, absorption and new deals signed have been on par with activity in 2019, supporting the construction pipeline. “Industrial market fundamentals remain healthy in Las Vegas. Vacancy stands at approximately 5% while we have recorded 3 million square feet of positive net absorption, which relates to occupancy growth, through the first three quarters of 2020, a figure that is pacing well with the annual growth seen in 2019,” says Jason Griffis, director at Cushman & Wakefield.

Like other booming industrial markets, ecommerce users have leased the majority of the new space; however, Las Vegas has also shown diversity among users. “Top tenant industries for industrial leasing activity this year have included technology/ecommerce tenants, which leased 1.5 million square feet, manufacturing, which leased 975,000 square feet, trade, transportation & utilities, which leased 950,000 square feet, and retail trade, which leased 889,000 square feet. This should translate into occupancy gains over the next 12 months as tenants occupy. North Las Vegas, the largest submarket, continues to benefit from tenant demand,” says Zac Zaher, a director at Cushman & Wakefield, says.

Donna Alderson, executive managing director at Cushman & Wakefield, expects this activity to continue through 2021, especially as population growth drives more demand from ecommerce users. “We expect the industrial sector to continue to flourish and Las Vegas is expected to continue to see industrial demand grow, in part due to increased online sales/e-commerce/warehouse demand,” she says.