By John Stater, Research Manager, Colliers
Southern Nevada gained 15,400 industrial jobs between August 2020 and August 2021, according to the Nevada Department of Employment, Training and Rehabilitation. The logistics and wholesale sectors added jobs on a year-over-year basis, while the natural resources and construction sectors lost jobs.
Unemployment in the Las Vegas-Paradise MSA was 8.3 percent in August 2021. Over the past 12 months, total employment in Southern Nevada increased by 55,600 jobs, a 6.1 percent increase. Southern Nevada lost 241,900 jobs between February and April 2020 and had regained 71 percent of those lost jobs by August 2021.
Southern Nevada is in its third major wave of post-Great Recession industrial development, with 6.6 million square feet of product now under construction. The fourth quarter of 2021 could see 2.3 million square feet of product added to inventory.
Projects scheduled for completion in the fourth quarter of 2021 are currently 58 percent pre-leased. Projects completed this quarter were 98.8 percent pre-leased when completed.
Net absorption this quarter was a record 4.45 million square feet. This brought net absorption up to 9.79 million square feet year-to-date, higher than the previous record for annual net absorption recorded in 2017.
Warehouse/distribution net absorption totaled 4.1 million square feet, accounting for 92 percent of the Valley’s net absorption this quarter. Demand for other industrial product types has improved over the past two quarters, but is still dwarfed by tenants’ appetite for bulk warehouse. Flex space suffered another quarter of negative net absorption, while other sectors combined for 366,463 square feet of net absorption.
The North Las Vegas submarket had the Valley’s highest net absorption at 3.8 million square feet, followed by the Southwest at 342,354 square feet and Airport at 234,049 square feet. Net absorption was negative in the Northwest and West Central submarkets this quarter.
The businesses most active in occupying space over the past four quarters were in the manufacturing (24.4 percent), retail (19.2 percent), logistics (12.6 percent) and wholesale (12.2 percent) sectors.
Local companies took 36.1 percent of the leased square footage we tracked over the past four quarters. Companies headquartered in the Southwest U.S. took 14.1 percent of the space occupied, followed by Southeastern companies at 12.1 percent and Midwestern companies at 9.6 percent. The top five states by company headquarters looking for space in Southern Nevada included Nevada, California, New York, Illinois and Texas.
Industrial vacancy decreased to 3.2 percent this quarter, its lowest level since 2006. On a submarket basis, the Valley’s highest vacancy this quarter was 5.9 percent in the rapidly expanding North Las Vegas submarket, followed by 4.3 percent in the East Las Vegas submarket.
The weighted average asking rate for industrial product in Southern Nevada increased to $0.81 per square foot (triple net) this quarter, $0.12 per square foot higher than one year ago. Rents increased year-over-year for all industrial subtypes, with the largest in incubator product at 23.8 percent. Warehouse/distribution product had 14.5 percent asking rent growth. All submarkets except West Central and Henderson experienced asking rent growth on a year-over-year basis. North Las Vegas had 19.7 percent asking rent growth compared to the third quarter of 2020.
Year-to-date, the industrial market saw investment sales volume of $1.2 billion in 90 sales totaling 8.1 million square feet at an average sales price of $150.97 per square foot. This puts 2021 sales ahead of 2020 in all data points. Industrial investors are clearly bullish on Southern Nevada’s industrial market.
User sales volume was $235.8 million in 104 sales totaling 1.6 million square feet at an average sales price of $147.45 per square foot year-to-date. Prices have dropped year-over-year by 35.7 percent for light industrial, by 2.5 percent for light distribution and by 0.8 percent for flex product, but increased by 17.9 percent for incubator and by 56.3 percent for warehouse/distribution.
The bulk warehouse explosion may have been sparked by the ecommerce sector, but it is now being fueled in Southern Nevada by light manufacturing companies. Is this the long-prophesied exodus from California to Southern Nevada? It is hard to say for sure. While 25 percent of the manufacturing leases we tracked over the past four quarters were from companies headquartered in California, we do not necessarily know if these are moves or just expansions. Either way, it is notable that these companies are finding a resource-scarce region like Southern Nevada a fitting place to open manufacturing operations.
If the U.S. economy can keep growing through 2021 and 2022, Southern Nevada’s economy should follow suit. Visitation to the Strip is helping the wholesale sector, in-migration to the Valley is stimulating the construction sector, and economic freedom and an affordable cost of living may be stimulating demand for industrial space by manufacturing and logistics companies.