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| Oct 28th, 2010 |
Report from CALV and RCG points to more trying times for local commercial real estate market, though some signs of improvement as 2011 approaches
For Immediate Release:
LAS VEGAS – Local commercial real estate statistics released today by Restrepo Consulting Group and the Commercial Alliance Las Vegas (CALV) show some signs of improvement but suggest most aspects of the industry in Southern Nevada may take at least two years to stabilize.
Local economist John Restrepo, principal of the Restrepo Consulting Group LLC, released the quarterly market report in conjunction with CALV and based on commercial real estate data collected through Sept. 30. He said the struggling local economy continues to create challenges for the commercial real estate market.
“While we are seeing a drop in the rate of decline in jobs, and while housing prices are stabilizing, this does equate to recovery,” Restrepo said. “That said, many commercial tenants continue to struggle paying their rents, while landlords struggle with increased rent relief demands by tenants. This continues to impact project pro formas. Also, banks are more involved than ever in approving deals.”
Mike Hillis, a CALV board member and managing partner of Commerce Real Estate Solutions in Las Vegas, said the increasing number of transactions is a bright spot.
“While vacancy in all sectors as well as lease rates have not improved in 2010 over 2009, leasing activity is up 25 to 30 percent,” Hillis said. “We are seeing landlords and tenants alike realizing that the current economic conditions are going to be with us for the foreseeable future and thus are making decisions and commitments. We believe that once the tax situation, as well as the newly proposed accounting rules for leases, are clearly defined, transaction activity in both property sales and leasing will improve.”
Highlights of the report from CALV and RCG include:
State of the Industrial Market
The Las Vegas Valley’s industrial market ended the third quarter with nearly 107.2 million square feet of space, about the same amount it had at the end of the second quarter of this year, Restrepo said.
RCG and CALV also reported that there was about 17.5 million vacant square feet of industrial space at the end of the third quarter. This represented a vacancy rate of 16.3 percent, compared to 16.2 percent at the end of second quarter.
According to CALV and RCG, absorption was a positive 107,000 square feet, following nine quarters of negative absorption. There were also 276,000 square feet of completions recorded. Restrepo attributed this primarily to increased leasing activity in North Las Vegas, including 215,000 square feet leased by Amonix in the Golden Triangle Industrial Park and another 214,000 square feet leased by Czarnowski Display Service in the ProLogis Park.
“The industrial market remains wobbly as we head toward the end of 2010,” Restrepo said. “Even with positive absorption this quarter, the industrial market continues to bump along the bottom. We still believe a real recovery won’t be seen until late 2011 or early 2012 at the earliest. The main missing ingredient remains jobs.”
State of the Spec Office Market
The local spec office market ended the third quarter with roughly 42.7 million square feet of space, about the same as it had at the end of second quarter, Restrepo said.
RCG and CALV reported about 9.7 million square feet of vacant space in the local office market at the end of the third quarter. This represented a direct vacancy rate of 22.7 percent, slightly below the 22.8 percent recorded at the end of second quarter.
“The office vacancy rate is probably closer to 30 percent when available sublease space is included,” Restrepo said. “The spec office market will likely remain weak for several years.”
He added that absorption was a positive 11,400 square feet in third quarter – “not much, but at least better than the six-figure negative rate we have typically seen each quarter. We don’t expect the market to stabilize for at least two years. We continue to forecast that the valley’s office market will be the last recover, because of the massive amount of overbuilding during the bubble. Additionally, we don’t anticipate a hiring binge any time soon.”
Hillis said well-located and well-managed office projects are seeing activity, even though many tenants are struggling to pay their rent and others are looking for lower rents elsewhere. This pressures owners, especially those who own “B and C projects in B and C locations,” he added.
State of the Anchored Retail Market
The valley’s anchored retail market ended the third quarter with about 43.7 million square feet, about the same as the previous quarter, according to CALV and RCG.
RCG and CALV reported that there were approximately 4.9 million vacant square feet in the retail market at the end of the third quarter. This represented a vacancy rate of 11.2 percent, 4 percent higher than recorded in second quarter. The retail market experienced a negative 183,000 square feet of net absorption during third quarter, a significant improvement over the second quarter’s negative 361,000 square feet.
Hillis and Restrepo said the local anchored retail market is faring better than other sectors of the commercial real estate markets, as measured by its vacancy rate. Still, they said this market remains challenged by the area’s high unemployment rate, restrained consumer confidence and reduced spending.
Restrepo cited at least three anchored retail centers that are either planned to begin construction in the next 12 months, or have been put on hold. They include a Target-anchored center at Decatur Boulevard and the I-215 Beltway, Decatur Marketplace and Green Valley Crossing.
Local economist John Restrepo, principal of the Restrepo Consulting Group LLC, released the quarterly market report in conjunction with CALV and based on commercial real estate data collected through Sept. 30. He said the struggling local economy continues to create challenges for the commercial real estate market.
“While we are seeing a drop in the rate of decline in jobs, and while housing prices are stabilizing, this does equate to recovery,” Restrepo said. “That said, many commercial tenants continue to struggle paying their rents, while landlords struggle with increased rent relief demands by tenants. This continues to impact project pro formas. Also, banks are more involved than ever in approving deals.”
Mike Hillis, a CALV board member and managing partner of Commerce Real Estate Solutions in Las Vegas, said the increasing number of transactions is a bright spot.
“While vacancy in all sectors as well as lease rates have not improved in 2010 over 2009, leasing activity is up 25 to 30 percent,” Hillis said. “We are seeing landlords and tenants alike realizing that the current economic conditions are going to be with us for the foreseeable future and thus are making decisions and commitments. We believe that once the tax situation, as well as the newly proposed accounting rules for leases, are clearly defined, transaction activity in both property sales and leasing will improve.”
Highlights of the report from CALV and RCG include:
State of the Industrial Market
The Las Vegas Valley’s industrial market ended the third quarter with nearly 107.2 million square feet of space, about the same amount it had at the end of the second quarter of this year, Restrepo said.
RCG and CALV also reported that there was about 17.5 million vacant square feet of industrial space at the end of the third quarter. This represented a vacancy rate of 16.3 percent, compared to 16.2 percent at the end of second quarter.
According to CALV and RCG, absorption was a positive 107,000 square feet, following nine quarters of negative absorption. There were also 276,000 square feet of completions recorded. Restrepo attributed this primarily to increased leasing activity in North Las Vegas, including 215,000 square feet leased by Amonix in the Golden Triangle Industrial Park and another 214,000 square feet leased by Czarnowski Display Service in the ProLogis Park.
“The industrial market remains wobbly as we head toward the end of 2010,” Restrepo said. “Even with positive absorption this quarter, the industrial market continues to bump along the bottom. We still believe a real recovery won’t be seen until late 2011 or early 2012 at the earliest. The main missing ingredient remains jobs.”
State of the Spec Office Market
The local spec office market ended the third quarter with roughly 42.7 million square feet of space, about the same as it had at the end of second quarter, Restrepo said.
RCG and CALV reported about 9.7 million square feet of vacant space in the local office market at the end of the third quarter. This represented a direct vacancy rate of 22.7 percent, slightly below the 22.8 percent recorded at the end of second quarter.
“The office vacancy rate is probably closer to 30 percent when available sublease space is included,” Restrepo said. “The spec office market will likely remain weak for several years.”
He added that absorption was a positive 11,400 square feet in third quarter – “not much, but at least better than the six-figure negative rate we have typically seen each quarter. We don’t expect the market to stabilize for at least two years. We continue to forecast that the valley’s office market will be the last recover, because of the massive amount of overbuilding during the bubble. Additionally, we don’t anticipate a hiring binge any time soon.”
Hillis said well-located and well-managed office projects are seeing activity, even though many tenants are struggling to pay their rent and others are looking for lower rents elsewhere. This pressures owners, especially those who own “B and C projects in B and C locations,” he added.
State of the Anchored Retail Market
The valley’s anchored retail market ended the third quarter with about 43.7 million square feet, about the same as the previous quarter, according to CALV and RCG.
RCG and CALV reported that there were approximately 4.9 million vacant square feet in the retail market at the end of the third quarter. This represented a vacancy rate of 11.2 percent, 4 percent higher than recorded in second quarter. The retail market experienced a negative 183,000 square feet of net absorption during third quarter, a significant improvement over the second quarter’s negative 361,000 square feet.
Hillis and Restrepo said the local anchored retail market is faring better than other sectors of the commercial real estate markets, as measured by its vacancy rate. Still, they said this market remains challenged by the area’s high unemployment rate, restrained consumer confidence and reduced spending.
Restrepo cited at least three anchored retail centers that are either planned to begin construction in the next 12 months, or have been put on hold. They include a Target-anchored center at Decatur Boulevard and the I-215 Beltway, Decatur Marketplace and Green Valley Crossing.
About the Company:
About the Restrepo Consulting Group
As a dominant source of strategic advice and information related to real estate development in the Southwest U.S., RCG offers a broad range of economic consulting services to the private and the public sectors. For more information about RCG, visit www.rcg1.com.
About the Commercial Alliance Las Vegas
The Commercial Alliance Las Vegas (CALV) is the commercial real estate division of the Greater Las Vegas Association of REALTORS®. Using its Catylist commercial real estate database, developed by and for local commercial real estate professionals, it organizes and empowers the industry in Southern Nevada through education, networking, promoting professionalism and shaping public policy. Membership in CALV is open to REALTORS® and non-REALTORS® alike. For more information, visit www.calv.org.
As a dominant source of strategic advice and information related to real estate development in the Southwest U.S., RCG offers a broad range of economic consulting services to the private and the public sectors. For more information about RCG, visit www.rcg1.com.
About the Commercial Alliance Las Vegas
The Commercial Alliance Las Vegas (CALV) is the commercial real estate division of the Greater Las Vegas Association of REALTORS®. Using its Catylist commercial real estate database, developed by and for local commercial real estate professionals, it organizes and empowers the industry in Southern Nevada through education, networking, promoting professionalism and shaping public policy. Membership in CALV is open to REALTORS® and non-REALTORS® alike. For more information, visit www.calv.org.
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