Commercial Real Estate Saw Gains in 3rd Quarter 2016
The third quarter of 2016 saw some big gains in commercial real estate based on a recent report that was released by Xceligent and the Commercial Alliance Las Vegas (CALV). The slow and steady progress that was seen continued and this is very encouraging for the commercial market as a whole.
The 2015 CALV President, Soozi Jones Walker, CCIM, SIOR, and a longtime commercial real estate broker, said, “As we’ve been saying for some time, the local commercial real estate market continues to make slow and steady progress, although we still have sectors that haven’t fully recovered from the dramatic downturn we experienced during the recession. For example, we’re finally starting to see more encouraging news about our local office market, which has been the slowest to bounce back.”
Major Activity in Office Real Estate Market
The latest data showed that the Southern Nevada office real estate market ended the third quarter of 2016 with an overall net absorption of 473,251 square feet, which is a huge increase. “This is the greatest amount of activity the market has seen in a single quarter over the last two years,” said Tina Reith, director of analytics for Xceligent in the Las Vegas market. “With over 70,000 square feet of space scheduled for occupancy next quarter, the market is on track for over 800,000 square feet of absorption by the end of the year. This would make for two consecutive years with absorption totals of this caliber.”
The local office vacancy rates have went down from 18% to 16.1% year over year, Reith said. While Class A office space has been staying comparatively steady with a 20% vacancy rate, Class B office space improved by 2.1%, and Class C space fell by 0.7% over the last year. The rents for office spaces are increasing and the weighted average monthly rate is now $1.83 per square foot and it has increased by .02 each quarter of 2016.
Commercial Retail Real Estate
In the retail portion of the market, the total vacancy rates have improved over last years from 8.6% to 7.8% this year. During the first two quarters of 2016, 450,000 square feet of space was absorbed. Pace slowed during the third quarter, but ended with a positive net absorption of almost 43,000 square feet. The store closings of ABC Food Market, Wal-Mart, and two Office Max locations contributed to the lower absorption total, while there were also some retail highlights to help balance out the vacancies. The highlights included the first openings in Southern Nevada for Dave & Buster’s and Cracker Barrel. Chick-Fil-A openings are coming soon.
Industrial Real Estate Market
The industrial market is still showing growth with a total vacancy rate improving from 6.2% to 5.8%. The third quarter closed with a positive total net absorption of 667,316 square feet of space and the market has absorbed just under 2 million square feet of space. This trend is expected to continue, as more industrial projects are under construction and are coming available as pre-leased space.
Each portion of the commercial real estate market is essential to the other, as they each feed upon the other. The trends toward greater health in each points to greater health for the residential market for buyers and sellers for the first time since the housing crisis.