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 …
Market Reports
While most of the country grows based on the birthrate, Las Vegas has grown at almost six percent per year based on the tremendous influx of new residents. That growth fueled retail development matching the pace until the growth suddenly stopped in 2008. But today, a different scenario is beginning to emerge. With many retail tenants going out of their spaces, beginning in 2008, the local retailers that had survived began a flight to quality. Key tenants in strip centers moved up to anchored centers. Other retailers that had been in the back of strip centers moved up onto pads. The addition of new space has been in waves, with the first starting in 2009, as the local retailers that survived the prior year and saw rents decreasing began adding second locations. The second wave of tenants began at the end of 2009, as strong regional retailers began seeking additional locations. The third wave, which has so far been quite small, is the national tenants. With so many choices around the nation, the national retailers are still trying to decide if Las Vegas, which was hit particularly hard, makes sense regarding expansion. The type of tenants that have been most …
The Las Vegas office market features a number of unique characteristics. For example, the Class A office market is not concentrated into a central business district. Office users in the downtown area consist almost exclusively of tenants that require proximity to the courts or government offices. Consequently, the tenant mix is limited to uses associated with litigation and government services. Other Class A tenants are spread around the valley at projects such as Hughes Center, a location favored by financial services, gaming interests and transactional law firms. The pool of Class A tenants is relatively shallow, measuring 6.2 million square feet or 13 percent of the overall office market. Reasons include a narrow economic focus — primarily gaming and tourism — and a lack of regional or national corporate headquarters. Consequently, speculative development and operation of Class A office space favors local players (i.e., developers, lenders and brokers). The speculative office pipeline for Las Vegas is dry except for one notable project. Tivoli Village, a 750,000-square-foot retail/office project, is anticipated to deliver its first phase in October. Despite office vacancy in excess of 20 percent, the developers, a partnership between IDB Group of Israel and local developer EHB Companies, have …
The Las Vegas retail market has taken a significant hit during the economic downturn, but amid the doom-and-gloom the city continues to attract retailers and visitors that eventually will help restore stability to the region. Much of the declines are being driven by the general economy and, subsequently, joblessness throughout greater Las Vegas. According to the U.S. Bureau of Labor Statistics, the metropolitan area reported an unemployment rate of 13.8 percent in January 2010, compared with 10.3 percent in January 2009. With nearly 136,000 people out of work in metro Las Vegas, it has been difficult for the market to achieve consumer spending levels that could help turn the market around. Recent retail statistics show worsening conditions for metro Las Vegas. According to a December 2009 survey conducted by Applied Analysis, the Las Vegas retail market had a vacancy rate of 10 percent, which is up from 7.5 percent in December 2008 and more than double the market's historical 10-year vacancy rate of 4.5 percent for anchored retail centers. Meanwhile, average retail property rents reportedly declined to $1.84 per square foot, down from $2.13 just 1 year prior. New development virtually stalled for retail properties in the market during 2009. …
The key indicator in the retail market in Reno/Sparks is that vacancy rates have increased and are expected to continue increasing for the remainder of 2009. Vacancy rates have reached nearly 15 percent at the mid-point of 2009 and net absorption continues to be negative. The amount of space available continues to increase due to unemployment, bankruptcies, relocations and acquisitions. Area home prices continue a downtrend with the majority of sales coming from distressed properties. The good news is that unit sales are up year over year, and home affordability has never been better. Retail lease rates continue to decrease as an estimated 2.4 million square feet of space is currently available in Reno/Sparks. Cap rates have increased steadily since a low in 2007, but the increase appears to have slowed down. The Legends at Sparks Marina held a grand opening in June 2009 and will be one of the major retail locations in the Reno/Sparks metropolitan area when it is completed. Developed by RED Development, the 2 million-square-foot shopping and entertainment destination is located on 147 acres in Sparks fronting Interstate 80 and will be highly visible to out-of-state travelers passing through the area. Because the project is estimated …
The northern Nevada office market remained weak in 2008 with all four quarters recording increased vacancy and negative net absorption, a continuation of a trend that began in 2007 when three out of four quarters finished with negative net absorption. Last year finished with negative 116,000 square feet of leased office space and vacancy exceeding 20 percent. Directly related to the drastic downturn in the residential real estate market, Reno’s office performance had been fueled by the national homebuilders, mortgage companies and title companies, who saw their requirements for office space drop as quickly as the demand for their products and services. The area’s office sector quickly changed from growth and high demand to nearly non-existent demand and increasing vacancy, thus leaving investors and developers scrambling for tenants. With rising vacancy and demand declining, many office property owners are willing to slash effective lease rates to secure tenants. The average asking rate for Class A properties at year-end 2008 was $22.08 per square foot, a $1.56 less than a year earlier, and Class B was down to $16.68 per square foot. During the highs of late 2006, the effective rates for class A product exceeded $27 per square foot. With …
The Reno-Sparks apartment market will continue to face occupancy challenges due to job losses at local casinos, hotels and other gaming-related companies due to the current recession. Effective rents will remain flat in 2009 and in some cases decrease, while occupancies are expected to decline, building on a trend established in second half 2008. Landlords will be forced to offer concessions as they compete for new and existing tenants. Apartment owners across the market are vying to attract new tenants and retain existing ones. As a result, concessions are ranging from reductions in deposits to a full month of free rent, especially at properties with management issues. Remaining flat, the local economy was experiencing unemployment of approximately 8 percent in November 2008 due to layoffs in many sectors, including the leisure and hospitality industry. In the 1970s, 30 percent of the employees in Reno worked in the gaming industry, but today only 17 percent are involved in that sector. In fact, the leading employers of Reno’s increasingly diversifying economy are the Washoe County School District, IGT, Catholic Healthcare West and the gaming-hospitality industry. Looking at fundamentals, fourth quarter 2008 vacancy was 9.4 percent in the Reno-Sparks MSA, reflecting an increase …
Odds are that Las Vegas developers, landlords and brokers did not mind putting 2008 in the rear-view mirror. Unfortunately, odds are also good that 2009 will be even more challenging. Commercial real estate certainly finds itself in unprecedented times. At the end of 2008, the Las Vegas office market had about 5.5 million square feet of vacant space, with the vacancy rate rising to 17.24 percent. This number doesn’t include the increasing amount of sublease space on the market or what is even harder to track, shadow space — unused space not being marketed. Even with the amount of vacant space on the market, there is roughly 2.2 million square feet under construction, most of which will hit the market in 2009. Based on historical absorption averages, the estimated supply of existing vacant space now would take about 5 years to absorb. The average asking lease rate ended 2008 at $2.40 per square foot, but is expected to decrease during first quarter 2009. Landlords have tried to maintain their face rates, but will generally bend significantly to make a deal. Available shell space on the market has more leasing challenges than second-generation space. With the cost of construction exceeding the …
Las Vegas’ retail market is now clearly showing the strain of the recession. Decreased consumer spending has directly impacted local retailers, as unemployment climbs and shoppers find themselves with less discretionary income. Holiday season revenues were the weakest on record, and luxury stores, apparel chains and department stores all reported declining sales. Meanwhile, developers continue to experience difficulties securing financing for planned projects. As a result, several planned projects are on hold, and few of the currently planned and under construction projects should open in 2009 and 2010. Underperformance, the liquidity crunch and tighter credit terms with vendors, combined with the recession, made it impossible for many large box retailers to remain in business, thus bringing on the vast amount of power center vacancies. Small local retailers relied on SBA loans and equity from residential properties and saw both of these sources vanish, thus preventing many from opening new stores and leaving many strip centers with higher vacancies. Retailers that are performing well are very cautious regarding expansion. With already close to 3 million square feet of vacant large box retail space in the Las Vegas market, expect to see vacancies continue to rise this year. However, increased vacancies provide …
The northern Nevada office market remained weak in 2008 with all four quarters recording increased vacancy and negative net absorption, a continuation of a trend that began in 2007 when three out of four quarters finished with negative net absorption. Last year finished with negative 116,000 square feet of leased office space and vacancy exceeding 20 percent. Directly related to the drastic downturn in the residential real estate market, Reno’s office performance had been fueled by the national homebuilders, mortgage companies and title companies, who saw their requirements for office space drop as quickly as the demand for their products and services. The area’s office sector quickly changed from growth and high demand to nearly non-existent demand and increasing vacancy, thus leaving investors and developers scrambling for tenants. With rising vacancy and demand declining, many office property owners are willing to slash effective lease rates to secure tenants. The average asking rate for Class A properties at year-end 2008 was $22.08 per square foot, a $1.56 less than a year earlier, and Class B was down to $16.68 per square foot. During the highs of late 2006, the effective rates for class A product exceeded $27 per square foot. With …