While Southern Nevada’s economy has not reached the dizzying heights of the boom, it does seem to have safely left the bust behind! In fact, we think it’s safe to say the Great Recession appears to be officially over and the initial phases of recovery and stabilization are well underway, both in our overall economic position and our local real estate market. Is the Valley poised to grow anew?
Moderate growth continues unabated and is expected to continue into 2015. Between 2010 and 2013, new home sales increased 37.6 percent, out-of-state drivers licenses turned in to the DMV increased 28.6 percent, taxable sales increased 18.4 percent, and gaming revenue increased 8.6 percent. Though 2014 has shown some deterioration in terms of new home sales and in-migration into the area, taxable sales improved. Employment also increased 3 percent from July 2013 to July 2014.
These economic improvements have translated into improvements in our local real estate market. Occupancy in commercial real estate projects has increased by three percentage points to 2.9 percent and we are seeing growth in other sectors as well.
Las Vegas Industrial Market
The first half of 2014 looked promising for Southern Nevada’s industrial market, racking up over 2 million square feet of net absorption and knocking industrial vacancy below 10 percent for the first time since 2008. The question then was whether we could expect similar numbers in the second half of the year. If the third quarter of 2014 is any indication, the answer is maybe.
Net absorption in the third quarter of 2014 was 635,780 square feet, roughly equal to net absorption in the first quarter of 2014, and occurring in concert with only 14,248 square feet of new completions, far less completions than in the first quarter. Strong net absorption in speculative projects is a sign of sustainable recovery, and important given that speculative construction will likely loom larger in 2015 than in the past five years. Industrial vacancy decreased to 9.2 percent, two percentage points lower than one year ago. The weighted average asking rental rate increased to $0.55 per square foot (psf) on a triple net (NNN) basis, $0.04 cents higher than one year ago.
Las Vegas Office Market
Every year, Southern Nevada’s office market begins a new recovery, and every year it comes up just a little short in the end. Though the office market recovery has not been pretty, it is a recovery of sorts.
In the third quarter of 2014, net absorption decreased to 44,964 square feet from almost one half-million in the second quarter of 2014 and the third quarter of 2013. New completions were slightly higher, at 12,000 square feet. Vacancy rates managed to decrease to 19.3 percent from 19.4 percent in the second quarter of 2014. Asking rates remained in neutral, ringing in at $1.87 per square foot (psf) on a Full Service Gross (FSG) basis.
Las Vegas Retail Market
The second quarter of 2014 saw the retail market turn around and post positive net absorption after two quarters of negative net absorption. The third quarter of 2014 continued the positive trend, with net absorption staying just one step ahead of new completions; a good performance, but not a great performance.
Net absorption in the third quarter was 242,296 square feet, slightly higher than in the second quarter of 2014, and more than double net absorption in the third quarter of 2013. New completions also increased quarter-over-quarter and year-over-year, with a 220,000 square foot power center added to inventory this quarter. Retail vacancy decreased by 0.1 percentage points to 9.0 percent, while the average asking rental rate increased to $1.31 per square foot (psf) on a triple net (NNN) basis.
Las Vegas Medical Office Market
When we write that Southern Nevada’s medical office has gone from bad to worse, we feel as though we must be repeating ourselves. In fact, a pattern of positive net absorption for one or two quarters followed by one or two quarters of negative net absorption is emerging in the medical office market, creating a sense of running in place.
Net absorption in the third quarter of 2014 was negative 104,034 square feet, sending medical office vacancy up to 18.7 percent. Asking lease rates remained stable at $2.15 per square foot (PSF) on a full service gross (FSG) basis.
Las Vegas Land Market
Total sales volume for land in Southern Nevada remains well below the levels seen in 2007, but the market has recovered dramatically since the years of the Great Recession. The number of acres sold in the first three quarters of 2014 is higher than in the first three quarters of 2013, with 1,889 acres trading so far this year compared to 1,455 acres trading in 2013. Sales volume was higher than in 2013 in the first three quarters of the year, and naturally this means that the price per square foot of land is also higher. In 2007, land was selling, on average, for $22.93 per square foot (psf). After the market collapsed in 2008, land prices reached a low of $4.41 psf in 2012. In the third quarter of 2014, the average price for land stood at $7.61. This increase in land prices is indicative of the greater interest developers and investors are showing in the Valley’s land market.
Las Vegas Hotel & Hospitality Market
Southern Nevada’s hospitality market continued to improve through the second quarter of 2014. Average annual room occupancy, for example, jumped from 87.0 percent to 89.5 percent, and the average annual ADR (average daily room rate) dropped slightly from $121.73 to $119.75. This brought revenue per available room (RevPAR) up to $104.61 from $101.77. In 2014, RevPAR is now almost $10 higher than it was in 2013, a significant leap (though not as significant as the $15 leap between 2010 and 2011). This suggests that Las Vegas has largely recovered from the Great Recession, just in time for new expansions of the Valley’s room inventory.
Las Vegas Multifamily Market
According to statistics provided by REIS, multifamily vacancy in Southern Nevada decreased in the second quarter of 2014 (the most recent quarter of available data), extending a three year long streak. Vacancy stood at 5.5 percent in the second quarter, 0.4 percentage points lower than one year ago, and 0.2 percentage points lower than in the first quarter of 2014. Class A properties were 5.7 percent vacant in the second quarter, the same as in the first quarter of 2014. Class B/C properties were 5.3 percent vacant, 0.5 points lower than in the first quarter of 2014.
To learn more about the current state of Las Vegas’ real estate market, or to discuss real estate opportunities, please contact us or call Antone Brazill at 702.434.0091.