By Dean Willmore, Executive Vice President; Kyle Kirchmeier, Associate; Alex Stanisic, Vice President; and Laura Wilhelm, Senior Field Research Analyst, CBRE
Las Vegas’ current industrial market is surprisingly resilient. There is, of course, a possibility of planned projects being put on hold or not moving forward at all due to rising inflation and economic uncertainty, but leasing activity hasn’t slowed. Regardless of never-before-seen rent growth, record-low vacancy and a marked increase in asking lease rates every 60 days, the market still may not have peaked.
As of the third quarter of 2022, the average asking lease rate was $1.19 per square foot (triple net), and the overall vacancy rate remained at a very low 1 percent. However, industrial/flex space in the 2,000- to 5,000-square-foot range, which is still dealing with the effects of the pandemic, has shown no noticeable rent growth. Some landlords are even offering leasing incentives to attract tenants. If the market contracts in 2023, smaller tenants in this size range will be the first to see its effects.
Nearly half of the 17 million square feet under construction during the third quarter was pre-leased, and nearly 80 percent of those projects were in North Las Vegas. The largest lease of the quarter occurred
in the submarket, with Crocs signing a 730,067-square-foot lease at North Las Vegas Logistics Center, which
is scheduled to be delivered in fall 2023.
With such a large amount of space being built, the industrial inventory base will expand by about 10 percent in the next 12 to 18 months. Additionally, with tight land availability throughout the Valley, developers are taking advantage of the vast amount of developable land in the Apex, which is at the northern portion of the North Las Vegas submarket. Several projects are already scheduled to be delivered there, beginning in the second quarter of 2023.
Industrial building sales have started to slow due to rising interest rates, with decreasing incentive for sellers to put their properties on the market. In fact, total sales in the third quarter decreased by nearly half from the previous quarter, with a median asking cap rate of about 4.53 percent. However, slowing sales are likely to be short-lived as the increased price of debt becomes more widely accepted by institutional buyers.
The largest investment sale in the third quarter was the 147,000-square-foot Amazon facility at 650 E. Owens Ave. in North Las Vegas for $63.5 million. This was followed by the 190,290-square-foot Catamaran sale at 8350 Briova Drive in the Southwest submarket, which traded at $35 million. The largest sale during the second quarter was the Link Logistics trade of Nellis Industrial Park in North Las Vegas to GID Investment Advisors for $96 million.
Looking to 2023, the Las Vegas industrial market has a bullish outlook and will continue to grow and expand. With a centralized location and lower overall costs, Southern Nevada will continue to attract business from California.