Industrial Becomes Particularly Attractive North of the Strip
The Southern Nevada industrial market has continuously seen improvement through the second quarter of 2015 with a positive absorption of 878,151 square feet. The overall vacancy rate followed suit and decreased to 8 percent – down 2.1 points from the 12 previous months, which ended at 10.1 percent. The asking lease rates also increased to an average of $6.38 – up almost 10 percent in the fourth quarter of 2014 when it stood at $6.16.
A new addition to the healthy market is the growth in new projects that are either planned or under construction. There is an estimated 2.4 million square feet currently under construction, with deliveries anticipated from the third quarter of 2015 through the second quarter of 2016. Big box distribution demand continues to climb, and most developers now believe “if you build it, they will come.”
One of the largest deliveries planned for the third quarter of this year is Prologis’ 3700 Bay Lake Trail. Bay Lake was originally planned as a 464,203-square-foot, speculative project. The entire development was leased by Cushman & Wakefield to the Global Equipment Company (GEC), a subsidiary of Systemax, prior to the official groundbreaking, however. This deal was an expansion for GEC from an existing nearby facility that contained 90,000 square feet. It illustrates the elevated levels of activity in the North Las Vegas submarket. Absorption in that area has exceeded 950,000 square feet thus far, while showing no signs of slowing down. We have also seen 23 transactions in this area so far in 2015, with a total volume of about $60 million. Meanwhile, sales prices are averaging about $95 per square foot valley-wide. Looking back over a 12-month period, that equates to almost a 20 percent increase in pricing when compared to the first quarter of 2014, which averaged $75 per square foot.
Finally, in an effort to spur growth and create a new industrial submarket for expansion, Mayor John J. Lee and his team in North Las Vegas have been working to create an Economic Diversification District that includes 7,000 acres of industrial land in Apex. This area is located about 30 minutes north of Las Vegas on I-15. Lee’s goal is to use legislation passed in Carson City to provide businesses with the same historic incentives that were provided to the Tesla Battery Facility to attract new businesses to the state.
By Amy Ogden and Danielle Steffen, Directors, Cushman & Wakefield | Commerce. This article originally appeared in the August 2015 issue of Western Real Estate Business magazine.