Las Vegas Homes and Real Estate News
REAL ESTATE MARKET: Industrial space dwindlingData show vacancy rate in LV hits all-time low of 3 percentJan. 18, 2006 The 3 percent fourth-quarter vacancy rate for 82.4 million square feet of inventory is less than half the 7.2 percent vacancy rate a year ago, local research firm Applied Analysis reported. "When you talk about the industrial market, you have to talk about national lows in vacancy rates," Applied Analysis founder Jeremy Aguero said Monday. "The amount of product for lease is as low as it's ever been." Nationwide, industrial vacancy rates dropped to 9.3 percent from 10 percent and rental rates increased 2.7 percent, Aguero said. In Las Vegas, industrial rental rates have jumped to 70 cents a square foot, up 25 percent from 56 cents at the end of 2004. "We are seeing an uptick in rental rates," Aguero said. "Can we sustain the current market if we can't bring on more industrial space? You cannot buy land at retail (prices) and make it work for industrial." Dave Dworkin, research analyst for Grubb & Ellis in Las Vegas, said the shortage of industrial land in the southwest, airport and Henderson submarkets has put upward pressure on prices in North Las Vegas, the last submarket with land at less than $10 a square foot. Land around Las Vegas Motor Speedway went from $5 to $8 a square foot in 2005, and Dworkin projects it will continue to escalate in 2006 to $10 a foot. He said developers will have to look to outlying areas to satisfy demand for industrial space this year. "Industrial development within Las Vegas may be close to extinction as future projects deplete an already shrinking industrial land market," Dworkin said. "Several communities lie within an hour of Las Vegas and may benefit considerably form the increasing need for industrial space. The question is which community and who will be the first to commit to develop." Aguero questions the viability of rural markets such as Mesquite, Laughlin, Glendale and Pahrump because they have neither the transportation infrastructure nor the labor market of Las Vegas. "Even the biggest market, Apex, has been plagued with viability issues, first infrastructure and now pricing," Aguero said. "I don't know that Apex will ever be used for what it's intended." Demand for industrial space during the fourth quarter outstripped supply with 945,000 square feet of net absorption, or the amount of new space taken by tenants, Applied Analysis reported. For the year, net absorption was 6.7 million square feet, better than the record 4.2 million feet in 2004 and almost double the 10-year average of 3.6 million feet. The lowest vacancy (1.5 percent) was in manufacturing space and the highest vacancy (5.5 percent) was in "flexible" office-industrial space. Industrial employment grew 9.7 percent in 2005, including construction-related employment for warehouse and manufacturing space, exceeding Las Vegas' overall employment growth of 7.3 percent. Dworkin said the southwest submarket, more than any other, experienced an extraordinary increase in building costs last year. A 10,000-square-foot, concrete tilt-up shell cost about $100 a square foot to build in 2004 and is now $160 a square foot. Building costs are projected to increase 20 percent to 25 percent more in 2006, he said. Although 4.4 million square feet of industrial space is under construction, Aguero said the activity may represent the last big wave of industrial development in the valley. With development costs driving up rents, the market may not make economic sense for regional and national distributors that don't have a close nexus to core industries in Las Vegas, he said. INDUSTRIAL MARKET
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