By Paul Sweetland, Senior Vice President, Colliers
After a record year in 2021, Southern Nevada’s industrial market does not appear to be slowing down. The first-quarter vacancy decreased to 1.7 percent with 2.9 million square feet of net absorption. This is the lowest vacancy rate we have ever recorded in Southern Nevada. For comparison, vacancy only went as low as 3.1 percent during the boom that preceded the Great Recession.
Demand was positive for all industrial subtypes for the first quarter, while rents for warehouse and distribution space increased 46 percent year over year. All industrial sectors added jobs on a year-over-year basis, with the largest increase being in logistics, which added 8,100 jobs. The current industrial boom has been driven by the influx of relocations and expansions from all over the U.S., but primarily from California. Southern Nevada’s strategic location, with its ability to service 12 markets within one day, has also made it an ideal location for regional and national distribution.
New industrial completions totaled 2.1 million square feet this quarter, almost all of it being warehouse/distribution product. Southern Nevada is in its third major wave of post-Great Recession industrial development, with more than 8 million square feet now under construction. An additional 6.9 million square feet is scheduled to be completed in 2022, and an impressive development pipeline of more than 20 million square feet will continue into 2023 and 2024.
Existing national developers, including CapRock, Prologis, Panattoni, VanTrust and Suncap, continue to acquire new sites. New groups have also entered the market. This includes Overton Moore Properties, which purchased six land sites where it’s planning to build about 3.5 million square feet. NorthPoint Development is soon to break ground on more than 2 million square feet in two buildings, while Hopewell Development also purchased six sites in the past 24 months. Projects scheduled for completion next quarter are currently 85.9 percent pre-leased. Projects delivered this quarter were 82 percent pre-leased at completion.
The North Las Vegas submarket took the first quarter off from dominating the market, ceding its top spot to West Henderson, which had 1.1 million square feet of net absorption. The Southwest submarket took second place, with 636,078 square feet, followed by North Las Vegas’ 433,334 square feet. North Las Vegas’ relative lower net absorption was due to a lack of new completions this quarter. The submarket currently has 4.3 million square feet under construction, so net absorption should pick up significantly over the remainder of 2022. With more than 54 percent of the new supply heading to the North Las Vegas submarket, it appears that it will again lead all areas with net absorption by the end of the year.
In the first quarter of 2022, Southern Nevada’s industrial market saw investment sales volume of $608.4 million in 41 sales. These deals totaled 3.1 million square feet and calculated out to an average sales price of $196.71 per square foot. This puts 2022 sales on pace to top 2021’s very impressive sales volume of $1.6 billion. Cap rates for the top industrial tier range from 2.87 percent to 3.50 percent.
High inflation, increasing interest rates, supply chain disruptions and international conflicts will potentially provide headwinds. However, with such a lack of supply it may be some time before we have to worry about Southern Nevada’s industrial market.