Las Vegas continues to benefit from a strong labor market, which is driving demand and strong fundamentals in the multifamily sector. Employment in Southern Nevada increased by 3.4 percent over the past year, reaching one million workers, while the total population in Southern Nevada increased 2.2 percent, surpassing more than 2.2 million people. With a well-documented shortage in housing, developers added more than 3,200 new apartment units during the year and still saw vacancies decrease 30 basis points to 5.2 percent. Part of what is driving the tremendous growth in Las Vegas is the billions of dollars in commercial developments. This includes several major resort renovations (Palms, Monte Carlo, Caesars), several new resort developments (Paradise Park, The Drew, Resorts World), and the $1 billion expansion of the Las Vegas Convention Center. There is also the $1.9 billion football stadium that is helping usher the city into a new era of professional sports. On the capital side, multifamily properties continue to be highly sought after by both private and institutional buyers. Although transaction volume slowed in the first quarter of 2018 compared to the same period a year ago, total volume was more than $350 million in the first quarter, marking …
There is a lot of buzz in the Las Vegas market a full 10 years after the Great Recession. Much of this buzz surrounds sports with the new Golden Knights hockey team; the Las Vegas Lights professional United Soccer League team; Las Vegas Aces WNBA team; and the NFL Raiders team. The new Raiders stadium is under construction now and is widely considered the most talked-about major development happening in Vegas. In a city that offers unmatched access to world-class gaming, shopping, tradeshows and conventions, the NFL coming to town creates yet another reason for people to visit Las Vegas. As you can imagine, many retailers and investors are trying to position themselves to take advantage of this entry. The overall vacancy rate for retail in the Las Vegas metro area was 8.7 percent. Rents for new developments range from $2.50 per square foot, triple-net to $4 per square foot, triple-net. Existing neighborhood centers, power centers and strip centers average $1.75 per square foot to $2.25 per square foot. Anchor and mid-box leases average $0.75 per square foot to $1.25 per square foot for both gross and triple-net-structured leases. Ground lease and build-to-suit are averaging $120,000 to $225,000 in annual …
Reno’s proximity to the Bay Area is supporting an economy beyond the gaming industry. The area’s lower cost of living is also attractive for Bay Area transplants attempting to further stretch their income. Tesla is the most notable utilizer of the metro’s favorable location and business-friendly environment. The company pulled 112 permits last year to build out internal areas of the factory. The introduction of Tesla’s electric semitruck necessitates a further expansion of production in the coming years. On the supply side, development is ramping up quickly as builders finally move away from primary markets to relieve housing pressure in tertiary metros. Inventory will expand by more than 4 percent this year, representing the largest increase on record. The South Reno submarket contains a majority of the completions slated this year. More than 1,400 units are underway in the submarket, including nearly 1,000 scheduled for delivery in 2019. Builders are also active in the Sparks submarket, where 600 units are underway and scheduled for completion. The introduction of new units has pushed up the percentage of properties offering leasing incentives to 16 percent. Still-tight conditions are limiting the average incentive to just nine days of free rent. An influx of …
Industrial sales and leasing in the Reno-Sparks area remains one of the best performing sectors in the marketplace, just as it did in 2017. With a record vacancy percentage below 4 percent, combined with new buildings being occupied upon completion, the strong demand for new and existing industrial product is a welcome normality from previous years. The North Valley’s submarket has been the dominant center point for speculative development. It is currently the fastest-growing submarket in Reno, as nearly 50 percent of the transactions containing more than 50,000 square feet were concentrated in this submarket. This is primarily attributed to the abundance of skilled labor in the area and proximity to Interstate 80. Developers continue their hunt for buildable land in the area, though the availability of readily developable parcels is dwindling. Driven by consumer shifts toward internet goods, along with burgeoning advanced manufacturing, capital from institutional and regional investors alike have entered Reno’s industrial market. This has led to the industrial market posting the largest volume and most competitive assets. Last year’s investment volume was up 90 percent year over year, with a 14 percent increase in the total number of sales. The most recent eye-opener was Blockchains’ acquisition …
I have had the pleasure of selling commercial office space in Northern Nevada for nearly 15 years. During this time, I saw the peak of the market from 2003 to 2008 wherein construction was at an all-time high, lease rates were reaching unseen heights and absorption was setting records. Then we all got to experience the Great Recession from 2008 through 2012. This saw nearly half of the buildings that were constructed during the previous peak become empty. Vacancy rates hit 20 percent, lease rates dropped to levels well below where they were in 2003, and construction came to a screeching halt. Then, magically, at the beginning of 2013 the economy took a turn and the Northern Nevada office market began its recovery. This was expedited in 2014 with Tesla making its announcement of the Gigafactory in the Tahoe Reno Industrial Center and the Tesla Effect created a national buzz that hasn’t slowed. Unfortunately, this has created a new problem. The Reno office market sits at 10.1 percent vacancy, down from 20.7 percent during the recession, as net absorption has been positive year over year since 2012. The absorption has been primarily in second-generation space as there has been relatively …
Last year was a relatively flat year for the Northern Nevada office market. Reno/Sparks had negative absorption in the first and third quarters of 2016, and positive absorption in the second and fourth quarters. The year ended up at 10,153 square feet of net absorption, according to the DCG internal database, essentially nullifying any real gains or losses. However, the Reno office market is much healthier at a 12 percent vacancy rate as compared to the nearly 20 percent recession highs. Each quarter also recognized more gross absorption than the previous quarter in 2016. Class A office continued to be in demand with rents increasing to north of $2 per square foot, per month, full service. Large spaces ideal for company relocations are difficult to find. Reno currently has a small supply of vacant, Class A spaces with more than 10,000 square feet available. However, we should see our first speculative construction take place in the Meadowood submarket as Mckenzie Properties plans a 40,000-square-foot building in Mountain View Corporate Center. New corporate relocations for office tenants were relatively quiet in 2016. In comparison to 2015, we saw large tenants relocate to our region, including Grand Rounds in South Meadows and …
Local market conditions are always related in some way to what’s happening on the national stage, so let’s first acknowledge our new leadership. Trump has continued talking like the businessman he is and in very much the same style that got him elected. In reaction, equities markets have continued to boil over into record-setting heights as the business sector embraces the potential for more business-friendly stances that will sooner or later emerge from Washington. Business resurgences always impact Northern Nevada, thanks to both its strategic location advantage in distributing to the 11 Western states and its highly business-friendly state climate. As for Tesla, 2016 showcased increasingly tangible direct and indirect effects from the expanding Gigafactory. Tesla leased a large warehouse in the Tahoe Reno Industrial Center near the Gigafactory to receive product for several years. Panasonic, Tesla’s quieter partner in the Gigafactory, also leased a large warehouse in the same park that is close to the plant. Another Tesla vendor, Daehan Solutions America, an international company supplying the automotive industry and headquartered in South Korea, leased a large space in the vacant ex-Amazon space in Fernley. These three transactions alone comprise a large portion of the market’s total quarterly absorption. …
Market Moves There is so much fascinating discussion happening around the Las Vegas office market: what is the future of the suburban office? How does layout truly affect the culture of a company? Is parking a dying amenity? For the Las Vegas office market, it is just as easy to be captivated by imagining the possibilities of tomorrow. The post-recession recovery has seen office as the last product type to get healthy. The resort corridor led the way with a few new developments, like the T-Mobile Arena and Lucky Dragon Hotel, but there were many significant rehabs and upgrades as well. Multifamily and industrial followed closely behind, not surprisingly. What is interesting is that multifamily developers, as well as industrial, have been delivering product classes the valley has not experienced in any previous cycles. These include integrated apartment communities with over-the-top lifestyle amenities, and big bomber industrial buildings with the latest fixings of the day. Office development completions, however, have been limited to niche plays like the 140,000-square-foot Federal Justice Tower, and relic projects like Downtown’s 200,000-square-foot One Summerlin. Some of these projects were carried out by new owners, some with a lower basis. These buildings filled up and are …
After finishing 2016 with a bang, 2017 is shaping up to be another great year for retail real estate in Las Vegas. Tourism, construction, population growth, infrastructure improvements and business growth are all cause for excitement. The Strip is once again predicted to dazzle retailers. There are currently more than $9 billion in construction projects underway or scheduled through 2019. The development lineup is dominated by Resort World, Steve Wynn’s Paradise Park and a hopeful sale of Fontainebleau. Alon is another exciting project that is looking to replace a major funding source so it can begin construction. Several other important, but smaller projects are scheduled to come on line later this year and into 2018. These include infrastructure, retail expansion and additional hotel room projects. New retail and food arrivals to the Strip include Skechers, Walburgers, Morimoto, Sugarcane Raw Bar Grill, Giordano’s and John Rich’s Red Neck Riviera. Around 42 million visitors from the U.S. and around the world enjoyed Las Vegas in 2016, and we are anticipating even more in 2017. Las Vegas population growth also continues. The city was ranked the 28th largest in the U.S. in 2016, while housing sales and construction continue to have healthy growth. …
There are two trends that describe the current state of retail development in Southern Nevada: restaurants are expanding and some junior boxes are closing. Ecommerce competition and the consolidation of retailers nationally has caused junior box tenants to continue to struggle. It is odd to see a new development like the 1.6-million-square-foot Downtown Summerlin open on the affluent west side of the Valley in October 2014, only to see two junior boxes close since then. The Sports Authority shuttered its doors earlier this year, while Golfsmith just announced it would cease operations by the end of 2016. Other retailers in the development are doing very well, but it is an unfortunate sign of the times to see junior anchors close in good retail developments. When analyzing ecommerce vs. bricks and mortar, retailers are paying more attention to the facts listed in the table below. The example compares Amazon to Walmart — both great businesses but differing models. The reason is clear why it is difficult to compete when Amazon is able to produce 165 percent more per employee. This analysis does not include the difference in fixed assets, which only further exaggerates the advantage for Amazon when considering what a …