Southern Nevada industrial real estate picking up steam

Industrial real estate is picking up steam in Southern Nevada, according to a new report from Colliers, a global commercial real estate company.

The region’s industrial market added 3.2 million square feet of inventory in the second quarter of this year, and most of this space was already pre-leased at completion. There was also net absorption of 3.1 million square feet during the second quarter of 2023.

John Stater, the research manager for Colliers out of Las Vegas, said one subsector is leading the way in terms of industrial space.

“The industrial market is currently driven by e-commerce in terms of the need by companies for logistics in the Valley and regional,” he said in an email response to the Las Vegas Review-Journal. E-commerce is generally described as online sales and subsequent distribution for companies’ goods.

The three largest industrial lease transactions to take place in the second quarter in Southern Nevada were Smith’s Food & Drug Stores taking 482,300 square feet at 1775 Raiders Way in Henderson, Interchange LLC leasing 400,801 square feet at 4970 North Belt in the city of North Las Vegas and Hey Dude Good to Go (shoe manufacturer) leasing 313,553 square feet in North Las Vegas.

Leasing and construction is happening

Among the submarkets, the city of North Las Vegas saw the highest net absorption with 2.33 million square feet, followed by Southwest with 666,895 square feet and Henderson with 66,608 square feet. Stater explained net absorption is a good number to follow when it comes to commercial real estate as a whole, as it gives a good market indicator of progress through time.

“Net absorption measures the difference in the amount of occupied square footage of real estate from one period to another. If more space is occupied now than a quarter ago, for example, you have positive net absorption,” he added. “Tenants often lease space in buildings before the building has been completed – we call this pre-leasing. If buildings are being completed with a high level of pre-leasing, it suggests strong demand in the market, and encourages developers to continue building new projects.”

The vast majority of construction (83 percent) was warehouse/distribution, and Colliers noted the Las Vegas Valley specifically has 19.9 million square feet in active development and 9.89 million of it has gone vertical, over one story, with the vast majority of that construction taking place in North Las Vegas.

Retail — which e-commerce falls under — led the way (22 percent) when it came to leasing industrial space in Southern Nevada over the past four quarters, followed by wholesale (16 percent), professional and business services (14 percent), manufacturing (12 percent) and logistics (10 percent). More than a quarter of the industrial space leased within that time period was done so by local businesses.

Industrial vacancy rates in Southern Nevada also dropped slightly in the second quarter, starting the year at 1.5 percent, down from 1.8 percent. Rent did go up, climbing 8 percent year over year, the biggest jump coming in the warehouse/distribution sector, which saw a 22 percent jump.

Job growth in industrial strong

The job market within the industrial real estate sector was also strong in the second quarter of this year as, according to the Nevada Department of Employment, Training and Rehabilitation, Southern Nevada added approximately 5,700 industrial jobs between May 2022 and May of this year, with all sectors posting growth except natural resources, which was stagnant.

When it comes to the third quarter, approximately 2.7 million square feet of industrial space is scheduled to be completed and more than half (52 percent) is already leased, according to the Colliers report.

Stater also noted in the report that industrial real estate in Southern Nevada clearly isn’t listening to any forecasting when it comes to recession talk within the U.S. commercial real estate sector.

“It is difficult to square current industrial performance with the prediction by many economists and business leaders of a potentially poor second half of 2023. For their part, developers seem to think the good times will continue to roll, as they brought an additional 6.5 million square feet of industrial space under construction in the second quarter of 2023.”

Contact Patrick Blennerhassett at pblennerhassett@reviewjournal.com.