Las Vegas office market ended year with higher vacancies

Continued weakness in the recession-ravaged Las Vegas-area office market highlights the first commercial real estate statistics issued for the fourth quarter of 2011.

Commerce Real Estate Solutions, an affiliate of national real estate brokerage giant Cushman & Wakefield, reported last week the office vacancy rate locally was 23.8 percent at year's end, up from 23.6 percent in the third quarter and 23.1 percent in the fourth quarter of 2010.

Those numbers compare with the U.S. average for office vacancies of 17.3 percent in the fourth quarter, as reported by commercial real estate data provider Reis Inc.

The Las Vegas office market has been the hardest hit among local commercial real estate sectors during the recession, with landlords struggling to attract and retain tenants and having to lower rental rates.

Retail vacancies locally through the third quarter of 2011 ran about 12 percent, while industrial ran about 15 percent late in the year, brokers reported.

Despite the uptick in office vacancies, Commerce Real Estate Solutions said there were signs of improvements in the Las Vegas-area office market as net absorption of space was positive in 2011 for the first time in three years.

Statistical information "shows strong signs that tenants are still moving out of older properties and submarkets and moving into newer, now more-affordable and better-located office product," the company said in its fourth quarter market report.

Positive net absorption means more space was occupied than was vacated. On the negative side, however, average asking rents of $1.91 per square foot per month in the fourth quarter were down from $2.10 at the end of 2010.

Commerce Real Estate Solutions separately reported on the local medical office market, saying its vacancy rate rose from 18 percent in the third quarter to 18.3 percent in the fourth quarter.

The medical office sector has been hurt by elevated unemployment levels, now at 12.5 percent in the Las Vegas area.

"As workers lose benefits or choose not to seek care, medical professionals are in need of less medical office space," that report said. "Landlords continue to offer lease concessions, and loan defaults and corporate downsizing continue to drive the sluggish market."

In another report, Commerce Real Estate Solutions reported mixed trends in the Las Vegas-area industrial market during the fourth quarter.

The vacancy rate of 15.1 percent was unchanged from the third quarter and was down from 15.8 percent in the fourth quarter of 2010.

Asking rents, however, fell year-over-year 1 cent to 52 cents per square foot per month.

This market suffered through negative net absorption of more than 851,000 square feet in 2011 and Commerce Real Estate said some distressed properties now held by loan special servicers may soon be released to the market, which could boost the vacancy rate.

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