Online Shopping Keeps Vegas’ Industrial Market Humming
By Amy Ogden, Logic Commercial Real Estate
This was an unprecedented year in a multitude of ways. Though the pandemic brought economic hardships — along with the world’s worst health crisis — it also opened our eyes to how quickly life can change overnight. Businesses reacted to the crisis as best and swiftly as they could to comply with state stay at home orders, capacity reductions, and the fear and panic that ensued. Little did we know that we would be desperately seeking toilet paper, cleaning supplies, and embracing online grocery shopping and food delivery with such intensity by early March.
The aforementioned, in turn, created a domino effect as the pandemic became the catalyst for a boom in the industrial real estate sector. Ecommerce has grown more over the past year than it ever has. These occupiers have seen their five-year trajectory of forecasted retail sales occur in just six months. The rise of ecommerce
has forever altered consumer buying behavior and expectations. With consumers now anticipating fast shipping and deliveries, there is now a strain on the traditional logistics and supply chain models. This has subsequently resulted in a heightened need for warehouse, fulfillment and distribution properties as businesses struggle to meet demands.
The industrial sector has also been impacted by big box retail and grocery stores trying to meet the growing demand for goods. Companies are now racing to find distribution space closer to customers. We expect to see smaller distribution centers (micro-fulfillment centers) to stage inventory closer to customers.
We could also see a race to scoop up more of Southern Nevada’s warehouse properties as vaccines, medical, and PPE manufacturing and distribution ramps up across the U.S. If this occurs, rental rates may increase even more with our already shrinking inventory of industrial space.
The Las Vegas industrial market has added more than 10.7 million square feet to its inventory since the beginning of last year. There was 6.6 million square feet delivered in 2019 and 4.1 million square feet delivered in 2020, year to date. There are 6.3 million square feet of industrial space under construction as of November 2020, compared to our 10-year average construction activity of 2.6 million square feet. New development remains strong in Southern Nevada with significant leasing activity on much of the planned and under-construction inventory.
Some of the significant wins for Southern Nevada’s industrial market during 2020 involved large ecommerce companies that entered or grew within the market. A couple examples include third-party logistics company Ruby Has, which expanded into 350,000 square feet within the newly developed Panattoni North 15 project. Amazon also picked up 850,000 square feet within the Speedway North Las Vegas submarket for its expanding footprint.
Meanwhile, owner-user sales have also remained steady as interest rates on SBA loans stay extremely attractive at 2.62 percent on a 25-year term.
With overall record net absorptions in 2020, there is nothing to indicate 2021 won’t see continued growth in Southern Nevada.