Western Market Reports

Unprecedented Industrial Rent Growth Puts Eyes on Northern Nevada

by Jeff Shaw April 1, 2022

By Shawn Jaenson, Senior Vice President, Industrial Specialist, Kidder Mathews The Northern Nevada industrial market is composed of 98.7 million square feet of industrial real estate spread across six submarkets. Northern Nevada’s centralized location allows for a one-day truck service to more than 60 million customers. Couple that with the fact that Nevada has no corporate tax, personal tax, inventory tax, franchise tax, or special intangible tax and the city is one of the most desirable industrial locations in the Western U.S. What was once thought of as unattainable in Northern Nevada has become the norm as nearly every record or statistic has been shattered and the market continues to show no signs of slowing. The overall market vacancy rate plummeted in 2021 to 1.7 percent, with a direct vacancy rate of 1.6 percent — a more than 200 percent decrease from the start of the year when overall vacancy rates were 5.3 percent and direct vacancy rates were 4.9 percent. Due to the unprecedented demand, new product in Northern Nevada has never been more crucial as new construction struggles to keep pace with market demand. In 2021, Northern Nevada had a positive net absorption of just over 7 million square feet, which …

April 1, 2022

California Market Reports Office Western Western Market Reports

Orange County’s Office Market Ebbs, Flows

by Jeff Shaw March 25, 2022

By Bob Caudill, Executive Vice President, Colliers We continue to see a flight by tenants into low-rise office properties, typically four stories or less, and out of high rises. This trend began pre-pandemic, but COVID has undoubtedly accelerated its movement. Asking rates in the market have flattened, while concessions like free rent, beneficial occupancy and improvement allowances have increased. The surge in construction costs continues, putting stress on the economics of lease deals. In addition, construction material delivery delays have impacted the completion of tenant improvements. We will continue to see challenging times for office owners in the short-term as tenants are unsure how much space they need going forward. More tenants will also struggle to pay rent on time. In the long-term, although some industries have learned that they can remain successful with most of their employees working remotely, others are experiencing negative impacts on creativity and collaboration. As a result, their businesses have suffered financially, and they will require their employees to return to the office. Activity and Impact The Irvine Company’s Spectrum Terrace has set a new standard in design and quality for low-rise, Class A office properties. Tenants in this project are creating a workplace environment that employees will want …

March 25, 2022

Market Reports Multifamily Nevada Western Western Market Reports

Reno Remains in Demand for Multifamily Investors

by Jeff Shaw March 21, 2022

By Robert Skinner, Broker-Salesperson, Sierra Nevada Properties Commercial Group Back in the day, Reno had lots of land, we did not need high density development and there was little reason to build vertically. Because of the efforts of state and community leaders, as well as economic development agencies like Economic Development Agency of Western Nevada (EDAWN) and the Northern Nevada Development Authority (NNDA), many companies relocated and expanded here. With the increase in jobs came the need for more housing. The multifamily rental vacancy rate in the Reno/Sparks area is currently below 2 percent, with fewer than 50 listings for townhouses and condominiums on the Northern Nevada Multiple Listing Service (MLS). The region has absorbed 750 acres per year since 2011, according to a recent study by Woods and Poole that utilized data from the Truckee Meadows Regional Planning Agency. The study further predicts the region will run out of developable residential land by 2038. The supply shortages are increasing the price of parcels, while landowners may not sell as they hold out for higher prices. This will accelerate the shrinkage of developable residential land. To meet demand, city planners are calling for higher density and vertical multifamily development. This means we …

March 21, 2022

California Market Reports Retail Western Western Market Reports

Orange County Retail Recap: Keep Calm and Carry On

by Jeff Shaw March 18, 2022

By Terrison Quinn, Managing Principal, SRS Real Estate Partners Despite the headwinds facing the Orange County retail property sector in 2021, retailers experienced record sales, while shopping center owners realized all-time-high property values. Orange County’s retail vacancy rate also decreased in 2021 from 4.58 percent to 4.32 percent as compared to 2020, according to CoStar. Meanwhile, rents increased from $33.12 per square foot, per year to $34.55 per square foot, per year — back to pre-pandemic levels. There are many reasons for these impressive numbers, though less stringent COVID rules and the solid job market may be two key drivers. Orange County remained less restrictive on businesses than neighboring Los Angeles County. The county also seems to have been the economic benefactor given the less severe climb out of the vacancy and unemployment challenges that were experienced through the pandemic. Orange County’s job market was hit hard during the pandemic with its large employment base in hospitality and leisure. However, it bounced back quickly with Disneyland re-opening and others hiring thousands of workers amongst robust consumer demand. Orange County’s job market is also recognized as one of the more diverse and higher paying counties in Southern California. Investors Continue to Eye Orange County as the Gold Standard …

March 18, 2022

Market Reports Nevada Office Western Western Market Reports

Reno Office Leasing, Development Bounce Back

by Jeff Shaw March 14, 2022

By Patrick Riggs, Senior Advisor, Office, Dickson Commercial Group The leasing market in Reno/Sparks is back on track following a strong end to 2021. The fourth quarter of 2021 concluded with an impressive 145,558 square feet of positive net absorption. This was the third straight quarter of positive net growth. Panasonic Energy stole the headlines in the quarter four with its 95,000-square-foot lease of 645 E. Plumb Lane in Reno’s central submarket. However, demand in the smaller office spaces under 5,000 square feet continues to be the driving force in this rebound. Local and regional companies with more flexibility to maneuver the pandemic were rewarded in 2020 and 2021 by capitalizing on aggressive landlord concessions. We are starting to see these concessions being rolled back as demand continues and vacancy nears pre-pandemic levels. The 2021 Reno sales market bounced back from 2020 with increases across the board in overall volume, price per square foot and number of sales. Both volume and the number of sales nearly doubled year over year. Average sales pricing is coming in at $300 per square foot, while new build-to-suit construction is over $400 per square foot with no slowdown in sight. Owner-users and office investors have been …

March 14, 2022

Arizona Market Reports Retail Western Western Market Reports

Job Gains, Visitors Returning Jolt Retail Consumption in Phoenix, While Growth Projections Buoy Investor Sentiment

by Jeff Shaw March 7, 2022

By Ryan Sarbinoff, First Vice President, Regional Manager, Marcus & Millichap Retail metrics in the Valley have soundly improved after enduring some turbulence during the health crisis. Through the first nine months of 2021, net absorption totaled roughly 1.6 million square feet, putting the market on a trajectory to record its highest annual count since 2017. More than half of that absorption was logged between July and September, indicating that momentum is building. Phoenix retail market is in a much stronger position heading into 2022 Several factors are driving the uptick in retail space demand. Metro employment surpassed the pre- pandemic peak by August 2021, spearheading consumers’ ability to spend. At the same time, more seasonal residents are returning to the Valley after many chose not to travel in 2020, while tourism is also progressing. According to the City of Phoenix Aviation Department, passenger counts at local airports increased by 67 percent year-to-date through September relative to the same period last year. All these underlying forces benefit retail spending, and ultimately fuel tenant demand. Longer-term outlook is robust, piloted by growth trends Phoenix is expanding at a swift pace, with the metro’s favorable climate, quality of life and job availability attracting new residents. From the beginning of …

March 7, 2022

Industrial Market Reports Nevada Western Western Market Reports

Southern Nevada’s Economic Recovery Continues Toward Pre-COVID Levels

by Jeff Shaw March 4, 2022

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 …

March 4, 2022

California Industrial Market Reports Western Western Market Reports

Lack of Supply Drives New Industrial Development in Orange County

by Jeff Shaw March 3, 2022

By Garrett McClelland, Vice President, JLL With a global pandemic still in flux, strong demand for Orange County industrial remained constant throughout 2021. As we start the New Year, signs of a slowdown are nowhere in sight. Orange County’s overall vacancy was at 2 percent last quarter, which ranks among the lowest nationally. Demand continues to outpace supply — with limited inventory bringing the vacancy rate down and driving rents to historic highs. With very few viable options, tenants are forced to settle for anything that will satisfy their needs, or renew. Given this, developers have gotten creative to find solutions and build new industrial product in primary submarkets. The primary target for industrial developers in Orange County has been Class B and C office buildings located on industrial-zoned parcels. For example, Duke Realty recently bought a primarily vacant 100,000-plus-square-foot office building in Brea. The building is situated on 5.8 acres and is planned for a new modern warehouse industrial facility. According to JLL Research, out of the 12 conversion projects announced last year, nine were office to industrial. This shouldn’t come as a surprise as we’ve seen rapid rent growth in the industrial sector over the past 24 months. This has made office-to-industrial …

March 3, 2022

Arizona Industrial Market Reports Western Western Market Reports

No End in Sight for Phoenix’s Industrial Strength

by Jeff Shaw February 25, 2022

By Pat Harlan, Managing Director, JLL Labor, geography, population growth and a steady stream of cost-effective, “speed to market” solutions make Phoenix one of the most dynamic industrial markets in the country. Based on existing fundamentals, 2022 is on track to be another record year. As of third-quarter 2021, Phoenix had landed just under 16 million square feet of net leasing year-to-date. Absorption had improved by more than 28.5 percent in the same 12-month period, to total 8.5 million square feet. Nearly 94 percent of that activity was generated from ecommerce and food and beverage users. Vacancy had also dipped to pre-pandemic levels, falling by 100 basis points year-over-year to just 6.8 percent as of the end of the third quarter of 2021. Construction continues to ramp up, trying to meet a seemingly unending stream of demand. As of the end of the third quarter, there was 16.6 million square feet of metro Phoenix industrial space under development. The West Valley accounts for about 11.3 million square feet of this activity. The Southeast Valley represents an additional 3.4 million square feet. Two of the largest buildings underway in the market right now are the Cubes Glendale, totaling 1.2 million square feet, and Building …

February 25, 2022

California Market Reports Office Western Western Market Reports

The Inland Empire’s Office Sector Comes Into its Own

by Jeff Shaw February 22, 2022

By Mark McAdams, Vice President, JLL While the Inland Empire is more well-known for its industrial real estate, the region’s office market has continued with its own success and stability pre- and post-COVID. As employees of office buildings seek refuge from high home prices in neighboring Los Angeles and Orange counties, occupiers equally appreciate the accommodating office rental rates while supporting their employee’s draw to the region. The current office market is in nearly the same place it was at the end of the first quarter of 2020 when COVID appeared on the scene. The overall market vacancy rate stands at 7.8 percent. Some of the submarkets have lower vacancies today than in the first quarter of 2020. Some smaller submarkets have seen even lower vacancy rates down to unprecedented levels at 3 percent to 5 percent. Only one submarket, San Bernardino, has a double-digit vacancy rate at 12.6 percent, and that is still considered healthy. Anything sub-10 percent is generally considered a landlord’s market. These are historically low vacancy rates that have rarely been seen since the area started developing the bulk of its office inventory in the mid-1980s. The pandemic put a hold on rental rate increases that had …

February 22, 2022

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