The Las Vegas market has a total office inventory of 60.7 million square feet in 3,820 buildings. There were 13 buildings completed in 2011 totaling 724,535 square feet. An additional 550,000 square feet was still under construction at the end of the fourth quarter. Net absorption in 2011 was a positive 402,712 square feet, largely due to the Metropolitan Police Department moving into their new 390,000-square-foot facility during the third quarter. The total office vacancy rate valley wide was 19.4 percent at the end of the fourth quarter, which did not include shadow inventory.
As this article was being submitted, Auction.com was completing another round of asset sales. Of the 25 property deed sales on the block in Las Vegas, four were office projects totaling about 204,000 square feet. Two of the14 non-performing notes were secured by office product totaling 103,000 square feet.
The largest office project sold in the auction was the 124,082-square-foot Sahara Plazas. Sahara Plazas is located in the central portion of Las Vegas and consists of 10 individually parceled Class B buildings situated on 7.87 acres. The largest non-performing note secured by an office product was Charleston Valley View at 86,586 square feet. This property is composed of five Class B office buildings situated on 7.04 acres.
Traditional sales activity for office buildings increased in 2011 as compared to 2010. The market saw 34 transactions with an estimated volume of $120 million in the first nine months of the year. This is compared to only 12 transactions with an estimated volume of $68 million in the first nine months of 2010. The average price per square foot was $71.50 for sales that occurred in 2011.
The top three reported sales by dollar volume were:
· Sunset Pilot Plaza: 98,645 square feet; sold to Ameriprise Financial from MIG Real Estate in the second quarter for $14.5 million
· 777 N. Rainbow: 151,662 square feet; sold to MIG Real Estate from CW Financial Services in the second quarter for $14 million
· Montecito Point: 177,014 square feet; sold to WalttCorp LLC from US Bancorp in the first quarter for $10 million
The average quoted asking rental rates for Class A office space in Las Vegas was $27.51. Class B rates were $19.23, and Class-C rates were $14.71 at the end of the fourth quarter. Concessions, incentives and tenant improvement allowances vary from project to project. A tenant can expect to receive up to one month of free rent per year of the lease term. Landlords are also exercising more creativity, with overall lease structures that match deal terms with tenants’ needs in order to secure qualified tenants.
The top three reported leases by square feet are:
· 7160 Bermuda Rd.: 48,536 square feet leased by Caesars Entertainment Operating Company in the third quarter
· Rainbow Sunset Pavilion’s Building A: 43,664 square feet leased by Wells Fargo in the first quarter
· Tivoli Village at Queensridge’s Building 10: 29,771 square feet leased by Merrill Lynch in the second quarter
— Hayim Mizrachi is managing director of NAI Las Vegas