Las Vegas commercial real estate vacancies remain elevated
17 April 2012
Newly released commercial real estate data show that, for the most part, the Las Vegas market continued to scrape along the bottom in the first quarter.
The commercial real estate sector of the Southern Nevada economy has been hurt during the recession by what turned out to be overbuilding during the boom years as many businesses, instead of expanding, reduced operations and laid off staff.
With unemployment still high at 12.2 percent in the Las Vegas area, the latest commercial occupancy numbers indicate the local economy has yet to turn the corner toward sustained growth.
Some analysts said the local retail sector picked up a bit during the first three months of this year, but most agreed the office market remained stagnant while the situation with industrial real estate worsened.
''Southern Nevada’s industrial market reversed a mildly positive course in 2011 with a very tough first quarter of 2012,'' Colliers International local research director John Stater said in the firm’s latest report.
Colliers said the local industrial market, consisting of some 108 million square feet of space in 4,300 buildings, ended the quarter with a vacancy rate of 15.4 percent, up from 15.1 percent at the end of 2011 and equal to the rate one year ago.
Analysts at Applied Analysis pegged the local industrial vacancy rate at 19 percent, a record level, up from 18.6 percent during the previous quarter and up from 17.7 percent one year ago.
With such high vacancy rates, landlords are being pressured to lower rents and experts expect the only construction in this sector to be build-to-suits as opposed to speculative product.
''The cure to the current supply-demand imbalance is time. As the economic recovery takes hold, hard-hit sectors of the economy will benefit, including the industrial real estate sector,” Applied Analysis principal Brian Gordon said in a statement Monday.
In another hard-hit sector, the local office building vacancy rate in the first quarter was 25.2 percent, equal to the fourth quarter but up from 23.7 percent one year ago, Applied Analysis said.
Analysts there are not optimistic for improvements in the short term as companies that lease office space are taking less space because they have become more efficient and employ fewer people.
''With more than 13.1 million square feet of vacant office space and one in four square feet empty throughout the valley, supply-side challenges persist. This factor is somewhat compounded by the fact that employers appear to have become more efficient with their resources,'' Gordon said.
Colliers pegged the office vacancy rate at 24.2 percent in the first quarter. Its statistics cover 1,931 buildings with about 39.3 million square feet of space.
In the retail sector, covering 268 properties with 44.2 million square feet of space, Colliers said the vacancy rate was steady from the fourth quarter to the first quarter at 11.6 percent but was up from 11.3 percent in the year-ago first quarter.
Applied Analysis, however, said its data showed retail vacancies running locally at 10.5 percent in the first quarter, even with one year ago and down from 10.6 percent in the fourth quarter.
This is the 12th consecutive quarter that the local retail rate remained in the 10 percent range, Applied Analysis said.
''While elevated compared to historical levels, the vacancy trend suggests stability is taking hold,'' Applied Analysis said in its report.
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