By Dan Palmeri, Senior Director, Tenant Advisory Group, Cushman & Wakefield
As with most of the country, Las Vegas’ office market has been significantly impacted since COVID-19 restrictions started back in March. While many businesses have been allowed to operate at limited capacities, we’ve also seen many larger office users elect to work from home over the past nine months.
This increase in work from home scenarios has naturally created a large increase in sublease availabilities in the market. Prior to March 17, 2020, we were tracking 24 subleases consisting of 555,000 square feet, with two of those spaces being 257,000 square feet and 61,000 square feet, or roughly 57 percent of the overall inventory. Since March, we’ve seen the number of availabilities increase to 70 with a total of more than 1.2
Dan Palmeri, Cushman & Wakefield
million square feet of space. This represents an increase of 118 percent. We’re tracking an additional 313,000 square feet of pending subleases that have yet to hit the market. This will bring the total to 78 options, with six of the availabilities being 50,000 square feet or larger.
Large tenant activity was minimal over the past nine months. The most significant transaction was NYU Grossman School of Medicine leasing 38,600 square feet at Hughes Center. We foresee this being the future trend, as we’re starting to see larger, out-of-state users identify Southern Nevada as a growth location for future expansions and relocations. As the casino, hospitality and convention businesses experience layoffs, new users to the market are experiencing a saturation of qualified employees to fill their immediate positions. This, along with the availability of new, quality supply (oftentimes plug-and-play spaces), has led us to believe the first few quarters of 2021 will see a momentum shift with office demand increasing.
Fourth-quarter absorption for the market was negative 216,000 square feet, bringing the overall market vacancy to 13.5 percent. This is up from the 12.6 percent Las Vegas experienced at the end of the first quarter of 2020. We have yet to see much movement on asking rates from landlords, though we are seeing an adjustment in the concession packages. We also anticipate more movement going into 2021 as we continue to see increases in sublease availabilities and existing tenants doing short-term renewals or vacating their spaces completely.
There are a few speculative office and mixed-use developments that are moving forward with construction, regardless of COVID-19. The most notable projects include Matter Real Estate’s Uncommons, a high-end mixed-use development slated to set the new high watermark for office space in the Las Vegas Valley. We also anticipate seeing AXIOM developed by Sansone Companies and EVORA, which is being developed by Joe and Danny Sorge, going vertical in the next month or two. All these projects are in the Southwest submarket, which is seeing the highest demand for office users.