Vegas Stays Strong in 2019

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LAS VEGAS – April 10, 2019 – We have opened the gates to 2019, and what a wild ride this year might turn out to be. Economic fundamentals in Southern Nevada started the year in good shape, but the potential impact of trade wars, quantitative tightening and the upcoming presidential election could negatively impact the economy as the year progresses. The key for real estate investors is to understand what game they are playing. Are they looking to flip properties for quick returns, or hold their properties for a longer term? The chances of a recession in the next 12 months appear to be low, but if those chances increase over the course of the year then short-term investors may begin accumulating cash to take advantage of foreclosures in a recession. For long-term investors, the danger is overpaying at the height of the market. Nobody can tell precisely what lies ahead, but doing your due diligence always pays off in the end.

It is difficult to predict whether 2019 will meet, beat or fall behind Southern Nevada’s industrial performance in 2018. Numerous projects are now planned or under construction, so steady demand will be met by new supply. The difficulty is predicting how much demand the Valley can expect over the next 12 months. Recession talk is in the air, and though a recession in 2019 does not appear to be likely, just the talk of recession can have a negative impact.

“We think 2019 will follow a similar trajectory to 2018, with generally strong demand for industrial space and a continued strong level of new warehouse/distribution construction,” remarked John Stater, the research manager of Colliers International’s Las Vegas office.

After a very strong year of land sales in 2018, Southern Nevada got off to a good start in the first quarter of 2019. A total of 530 acres were sold with a sales volume of $353.7 million and an average price of $15.33 per square foot. This was both the highest first quarter sales volume recorded in the past seven years, and the lowest first quarter number of acres sold in seven years. This means that sales volume was driven more by price than by a significant uptick in demand for vacant land. Commercial land was the big seller in the first quarter, followed by residential land and finally industrial land.

Executive Managing Director Mike Mixer said, “Given the sharp increase in the price per square foot of land seen in both the fourth quarter of 2018 and first quarter of 2019, a “desirable land” shortage may be forming. If so, it is happening at the same time that developers’ appetite for land is increasing.”

Multifamily is part of the residential spectrum, along with new home sales, existing home sales and single-family home rentals. All sectors of the residential market experienced sharp increases in sales prices and rents in 2018. The rate of increases in prices and rents is troubling for people trying to find an affordable place to live, and the increase in vacancy rates for both class A and class B/C would seem to bear this out. We think demand will continue to be strong for multifamily in 2019, but rental rates may have to be moderated to keep vacancy rates from rising higher.

Southern Nevada’s office market continued in 2019 to post the strong demand experienced in 2018, presaging a lucrative 2019 if the economy remains strong. With a general lack of new office development in the Valley, even somewhat lower levels of net absorption could see vacancy reach 11.5 percent by year’s end. Asking rates for office space are increasing, and will either stimulate additional office development or decrease demand, depending on just how strong the economy is in 2019.

After a strong finish in 2018, Southern Nevada’s retail market continued that trend into 2019. Net absorption was 263,918 square feet, a significant improvement over the negative net absorption experienced in the first quarter of 2018. New completions totaled 373,266 square feet, the largest increase in retail inventory in a decade. Vacancy was 7.7 percent, 0.6 points lower than one year ago, but 0.1-point higher than in the fourth quarter of 2018. The average asking rental rate increased to $1.45 per square foot (psf) on a triple-net (NNN) basis.

When the dust settled on 2018, Southern Nevada’s hospitality market appeared to have peaked in 2017. Most measures of the hospitality market were down in 2018 compared to 2017, even though they were still an improvement over the ten years prior. We only have January data so far in 2019, but it looks as though the hospitality market could be getting back on track, with many metrics showing improvement over January 2018.

After two years of significant improvement, Southern Nevada’s medical office market slowed down a bit in the first quarter of 2019. Demand was still positive and vacancy still decreased, but as much as in 2017 and 2018. This probably means that the pent-up demand for medical office space that drove performance in 2017 and 2018 has now largely been met, and the market is returning to a more normal level of demand. We think the medical office market will continue to grow in 2019, but at a slower pace than last year.

Full reports available for download: https://www2.colliers.com/en/Research/Las-Vegas/2019-Q1-Las-Vegas-LVQR-Market-Research-Report

About Colliers International

Colliers International (NASDAQ, TSX: CIGI) is a leading global real estate services and investment management company. With operations in 68 countries, our 14,000 enterprising people work collaboratively to provide expert advice and services to maximize the value of property for real estate occupiers, owners and investors. For more than 20 years, our experienced leadership team, owning more than 40% of our equity, have delivered industry-leading investment returns for shareholders. In 2018, corporate revenues were $2.8 billion ($3.3 billion including affiliates), with more than $26 billion of assets under management. Learn more about how we accelerate success at corporate.colliers.com, Twitter @Colliers or LinkedIn. To see the latest news on Colliers International in Las Vegas, follow @Colliers_LV on Twitter and @collierslv on Facebook.

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