Despite little commercial real estate development with the lowest rental rates in a decade, Las Vegas’ office leasing market has inched up in the positive direction.
There are also indicators that the area’s commercial real estate market will continue to struggle, with vacancy rates remaining as high as 25 percent until the end of 2012. Las Vegas remains one of the most challenging real estate markets in the country with some submarkets showing vacancies as high as 32 percent, while others report vacancies as low as 16 percent.
Still, there have been some significant developments recently impacting the office market. Zappos.com will occupy the former Las Vegas City Hall building in Downtown Las Vegas, which will house about 2,000 employees.
This signals continued revitalization for the Downtown area. Those 2,000 employees will need housing and, with a younger workforce, will probably spend disposable income on entertainment, particularly in the area close to their place of employment. Along with Zappos, government-related entities occupying commercial space is on the rise, and traditionally those entities prefer to be centrally located.
While there is noticeable activity taking place in certain Las Vegas submarkets like Downtown, other areas of Las Vegas are also improving — including the Summerlin and Green Valley areas. Medical offices near hospitals are also performing well.
Another trend Las Vegas has seen is an influx of new commercial real estate investors who are moving into this market. They’re incentivized by the low pricing, along with the ease of finding quality product to purchase. These investors are composed of mostly private funds and individuals that want to capitalize on the small window of opportunity hedging their bets on the Las Vegas market upside.
It is still very much a tenant’s market, but slowly the tides are changing in certain product types such as small industrial/office space. Concessions, incentives and tenant improvement allowances are certainly enticements. These include leases with one month free rent for each year of a lease term or tenant improvement allowances as high as $5 per square foot, per year.
While this market is still in recovery, Class A office space that is centrally located in any metropolitan city is always in demand…and who wouldn’t want a view of the Strip?
— Frank P. Gatski, CEO, Gatski Commercial Real Estate Services