Las Vegas office space vacancies, rents on the rise

The Las Vegas Valley’s office space vacancy rate has been on the rise for the past three quarters, but one area broker isn’t worried. The rise can be explained, said Taber Thill, executive vice president with Colliers International.

“The rise in vacancy is because there’s new office space that’s been delivered,” he said. “So when buildings are delivered, sometimes they’ve get pre-lease activity, but a lot of the time they are released with a lot of vacancy.”

A glut of new office space came onto the market in the second quarter of this year (188 million square feet) after zero was delivered in the previous two quarters. But construction of office space has dropped off since the first quarter of 2024 (262 million square feet) down to 98 million in the last quarter, according to the Colliers second-quarter office market report for Southern Nevada.

Office space vacancy has been on a steady climb in the valley since the second quarter of last year (just above 11 percent) and as of the end of the second quarter of 2024 sits at 12 percent, according to the report. Asking rents have also been on a steady rise and now sit at $2.65 cents per square foot, compared to $2.50 cents during the second quarter of 2023.

Office market hits ‘rough patch’

The Colliers report detailed the valley’s office space market as hitting a “rough patch” as net absorption is also down, but Thill explained the jump in asking rents is because a lot of high-end product has come onto the market and is being leased up, which pulls statistical numbers upward.

“The newer buildings are achieving the highest rents, and as those spaces get leased, we could see a slight dip in overall asking rents,” he said. “It’s only because there is less space available in the new buildings compared to the overall market.”

Las Vegas ranks at No. 51 for the most office space out of all major cities in the country, according to Colliers, with 46.6 million square feet. Manhattan leads the country with 539 million square feet of office space.

Las Vegas’ low office space numbers have insulated it from the overall U.S. downturn in the market, but cracks are starting to show locally, said John Stater, a research manager for Colliers. He said the national market has been affected by a few unfortunate trends, hitting “mega-markets” such as Los Angeles, New York and Chicago first, and is now finally coming the valley.

“It took a couple years before we started seeing these headwinds in Las Vegas, but they do appear to be hitting us now,” he said.

According to Colliers, the local market posted a drop of 300,960 square feet of net absorption in 2024, “its worst performance since midyear 2010.”

This was after a recovery in 2021 and overall growth in 2022-23 that gave the impression “Southern Nevada was immune to national office trends. Southern Nevada was, sadly, not immune,” the Colliers report said.

Stater said one of the main driving factors has been the rise of technology, which ushered in a wave of remote work that was compounded by COVID-19 pandemic restrictions forcing people from offices to work from home.

“The rise of computing and the internet was at first a boon for office landlords, as it made it possible for firms to do things they hadn’t been able to afford in the past, and thus expand their operations,” he said. “Over time, though, computers and the internet have meant companies could also do more with less, this means consolidation of space needs and thus a headwind to office demand.”

Las Vegas’ most famous office park, The Hughes Center, went into court-ordered receivership after its owner defaulted on its loan in July. New York-based investment firm Blackstone stopped making payments on a $325 million loan for the 1.4 million-square-foot complex last year.

Contact Patrick Blennerhassett at pblennerhassett@reviewjournal.com.