The office and industrial vacancy rates in the Las Vegas area fell during the second quarter, prompting a brokerage firm to suggest the city is starting to attract tenants.
Grubb & Ellis reported Monday the office vacancy rate dipped 1 percentage point to 22.5 percent, while the industrial vacancy rate fell slightly, to just above 15 percent.
Office leasing was strong during the second quarter, marking the third consecutive quarter more space was occupied than vacated, Grubb & Ellis Research Manager Dave Dworkin said.
“While there were relatively the same amount of transactions completed in the first half of 2011 as compared with the first half of 2010, a majority of the transactions this year have been new leases in comparison with the renewals or relocations, which were common last year,” Dworkin said. “This activity suggests that Las Vegas is starting to attract new tenants … in the wake of the recent recession.”
Almost twice the amount of industrial square footage was leased in the second quarter compared with the second quarter of 2010, he said.
Several warehouse and distribution leases were completed, five of which were more than 50,000 square feet. During the same quarter last year, most of the transactions were less than 25,000 square feet, Dworkin said.
“While this pickup in activity is a hopeful sign, the sheer amount of vacancy across the valley dictates that it may be at least another year before any stabilization in lease rates becomes visible,” he said.
Office vacancy in the southwest valley dropped by 1.8 percentage points to 22.6 percent after a decline of 1.4 percentage points in the first quarter.
“The southwest valley continues to be a highly desirable location to do business with abundant (newly constructed) space,” Dworkin said. “There were more lease transactions done in the southwest in the second quarter than any other market.”
If that part of the valley continues to improve, it could force falling lease rates to rise, he said.
A steady number of industrial foreclosure properties are being offered by banks, and many investors and single-tenant users are showing interest, he said.
A majority of those buildings are selling for less than their replacement value. Until recently, the sales were all cash, but Dworkin said owner-buyers have been getting financing for the transactions.