Commercial Real Estate Market Continues to Grow in 2018, But at Different Rates


— Colliers International – Las Vegas Releases 2nd Quarter Report —

Commercial real estate demand remained strong at midyear 2018 in Southern Nevada, while some segments of the market saw growth accelerate, others saw growth slow.

The office market in Southern Nevada continued its hot streak in the second quarter of 2018. Southern Nevada has seen 14 consecutive quarters of positive net absorption, which has sent vacancy down from a high of 22.4 percent to the current vacancy rate of 15.1 percent. Lower vacancy rates are beginning to drive increases in asking rates, which in turn may generate more office construction in the future, especially in the submarkets that are most in demand.

“Southern Nevada’s office market shifted into high gear in 2018,” said John Stater, Research Manager of Colliers International’s Las Vegas office.

Southern Nevada’s medical office market was strong at midyear 2018. The vacancy rate has fallen from 16.2 percent to 13 percent over the past five quarters and asking rents have shown moderate growth. Net absorption over the past five quarters totaled over 500,000 square feet, more than net absorption in the previous 46 quarters combined. Just as modern technology and needs for efficiency have driven changes in the retail and professional office markets, the medical office market has had to transition to a landscape of medical groups, mini-hospitals and retail health clinics. In 2018, Southern Nevada’s medical office market appeared to be managing this transition well.

“Southern Nevada’s medical office market now has a solid year of growth and recovery behind it,” said Mike Mixer, Executive Managing Director of Colliers International’s Las Vegas office.

Southern Nevada’s multifamily market appears to be embarking on a critical year in its history. With as many as 7,000 multifamily units scheduled for completion in 2018 – three times as many completions as in 2017 – we will discover if tepid levels of net absorption point to higher vacancy by year’s end, or a market where tenants are just waiting for new product to arrive. Population increases and single-family home prices should boost the multifamily market in 2018, but by how much is yet to be seen.

At the start of 2018, the industrial market saw a hasty departure from what had become common in 2017, namely strong demand for the new industrial projects that were being constructed in Southern Nevada. The second quarter of 2018 delivered a reprieve, with new completions slowing down and demand showing moderate improvement. While we are keeping an eye on vacancy in the warehouse/distribution sector, and expect that it will probably be higher by the end of the year than it is now, the more important activity is occurring in other industrial sectors. Sectors which are not experiencing record levels of inventory expansion are seeing weaker demand than they saw in 2017; in other words, new completions are not the problem. The industrial market began a significant recovery in 2012, and 2018 could mark a slowing of demand for industrial as that cycle ends. Provided the end of this cycle does not correspond with an overall economic recession, the decline of this cycle should not last for more than a few quarters.

Southern Nevada’s retail market appears to be shifting back into growth mode. Last quarter’s negative net absorption was not repeated in the second quarter of 2018, as net absorption increased to 124,512 square feet. Aside from the internal migration of people and retail from the north/east to the south/west, the main impact on the local retail market is e-commerce. Since 2017, 14 anchor retailers have closed their doors in Southern Nevada, totaling approximately 500,000 square feet of retail space. These closures are at least partially due to the impact of e-commerce on brick-and-mortar retail. If development remains relatively light, and we think it will, Southern Nevada’s renewed population growth should partially mitigate this issue and bring vacancy rates lower.

Visitor volume in Southern Nevada continued to come up short when compared to visitor volume last year; average year-over-year growth in 2018 was negative 1.1 percent from January to April. Gaming revenue, however, had 3.9 percent growth over the same period, and taxable sales in the leisure and hospitality sector had year-over-year growth of 107.4 percent. These factors apparently outweighed visitor volume woes in the minds of buyers, because sales of hospitality properties at midyear 2018 are stronger than in all of 2017 and are on pace to beat hospitality sales in 2016. Large casino hotels do not sell every year, but they do appear to sell every other year. 2018 has been one of those years, with sales volume at midyear topping $1 billion dollars. This volume of sales puts 2018 on pace to beat the last year of casino hotel sales in 2016, when sales volume for the year totaled $1.2 billion. This indicates that buyers are bullish on the future of Southern Nevada’s hospitality sectors, despite a downward trend in visitor volume that has persisted for almost a year.

Southern Nevada’s land market is experiencing a resurgence in 2018. At midyear, Southern Nevada has seen more acres sold than in 2017 and is on pace to surpass 2016, during which over 4,000 acres were sold. Sales volume in the second quarter of 2018 was higher than in the first quarter, despite only half as much land changing hands. Sales volume was also higher in the second quarter than one year ago. While the key sector last quarter was commercial land, residential land showed the most improvement in the second quarter. We think that as confidence in the local economy’s future improves, the potential for real estate development – commercial, industrial and residential – increases, and that will drive developers and investors to continue to buy land through the remainder of 2018.

The full second quarter report of 2018 can be downloaded at:


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