Industrial Supply Dwindles In Fourth Quarter

Southern Nevada's supply of industrial space was already tight, heading into the fourth quarter, with absorption outpacing new completions. Yet things became tighter as the valley recorded an ultra-low, 4.1%, fourth-quarter vacancy rate, despite adding 5.1 million square feet of new space in 2006, reports Restrepo Consulting Group, a Las Vegas-based economic research firm.Vacancies dropped 3.7% from two years ago, despite the market's growth last year. The Las Vegas area now hosts 3,684 industrial buildings, totaling 92.8 million square feet of rentable space."The valley's industrial market had a good 2006, with the absorption of over 95% of all completed and previously vacant square feet," said John Restrepo, principal of Restrepo Consulting Group. "We currently only have about a year and a half of supply left to accommodate the valley's industrial needs."

But relief may come soon from 4.1 million square feet worth of new projects underway in the fourth quarter, including Harsch's 523,000-square-foot Speedway Commerce Center II at Speedway and Hollywood boulevards, Thomas & Mack's 1.92 million-square-foot Northern Beltway Industrial Center in North Las Vegas, just south of the I-15/215 intersection, and Majestic Realty/Thomas & Mack's 3.2 million square feet of industrial space at the Beltway Business Park along I-215 between Decatur and Jones boulevards. Another 4.5 million square feet worth of industrial projects are planned for future development.Any easing of the shortage in the industrial sector could be short-lived, with the market recording a 0.98:1 absorption-to-completion ratio in 2006. That would be 17% below the year before. In other words, space is being absorbed as soon as it's complete."The demand for industrial space has continued grow to the point that the inventory of available product has declined to critical levels," said Vic Donovan, managing partner of Colliers International. "But there may be some relief because of the decline in land demand by homebuilders."Meanwhile, average asking rents climbed to 78 cents per square foot in the fourth quarter, marking five consecutive quarters of price increases. Fourth quarter rents were 11 cents more than a year ago and 28.2 percent above 2004. Warehouse distribution space had the lowest vacancy rate among all product types, at 3.2%, while R&D/flex space was the highest, at 12.4%."The focus of industrial demand is on certain submarkets, like the southwest (valley) and North Las Vegas," said Donovan. "This is being driven by their location along the 215 Beltway and I-15-North, respectively, and a growing economy largely driven by very healthy resort and construction industries."