CommCap Advisors - Industrial

As of the end of the 1st Quarter 2009, the overall vacancy rate for the Las Vegas industrial market was approximately 11.8% according to the Restrepo Consulting Group LLC Industrial Market Survey*. Vacancy rates and market rental rates vary significantly between various industrial property types which include: Warehouse/Distribution, Light Distribution, Light Industrial, Incubator, and R&D/Flex. Average market rental rates range from $0.51/s.f. NNN for Warehouse/Distribution space to $0.91/s.f. NNN for R&D/Flex space.

Las Vegas’ central location to major cities in the Southwest makes it a strong market for major warehousing and distribution facilities. Warehouse/Distribution product is generally regarded as one of the strongest performing property types in the Las Vegas Valley and reported a generally low vacancy rate of 6.8% for over 44 million square feet of reported space. The Valley’s two largest warehouse/distributions submarkets (North Las Vegas and Southwest) have performed even better, each reporting roughly 5.0% vacancy for over 30 million square feet surveyed. Although distribution space has been relatively stable, other industrial property types have not fared as well during the current economic downturn. R&D/Flex space has been hardest hit and reported a 28.4% vacancy rate at the end of the 1st quarter. This is largely due to small business owners struggling from a lack of consumer spending as well as taking losses on their retirement funds and savings which support many small operations.

The steep rise in land values in the years preceding the current recession caused fear throughout the Las Vegas Valley that we would run out of developable industrial land. Now, due to the significant drop in land values, industrial projects may become more viable. A testament to this is the planned construction of over 1.9 million s.f. of warehouse/distribution space which is perceived to hold strong future demand. Overall, we are seeing strong points in the industrial market that should continue to keep financing options available for good projects with strong locations and fundamentals. We expect struggling aspects of the industrial market to quickly recover following the current economic recession.