las vegas - colliers/media/files...far in 2016, the average was 5,634 per month, higher than the...
TRANSCRIPT
Q3 2016
Las VegasResearch & Forecast Report
Las VegasEconomic Review
2 Las Vegas Research & Forecast Report | Q3 2016 | Economic Review | Colliers International
Glossary
Industrial DefinitionsIncubator: Multi-tenant buildings without dock-high loading doors that have a parking ratio lower than 3.5/1,000 square
feet and bay sizes lower than 3,500 square feet.
Light Distribution: Multi- or single-tenant buildings that include dock-high loading doors and have bay sizes of less than 15,000 square feet.
Light Industrial: Multi- or single-tenant buildings without dock-high loading doors that have a parking ratio lower than 3.5/1,000 square feet and, in the case of multi-tenant buildings, bay sizes of at least 3,500 square feet.
Flex: Multi- or single-tenant buildings without dock-high loading doors with parking ratios in excess of 3.5/1,000 square feet.
Warehouse/Distribution: Multi- or single-tenant buildings that include dock-high loading doors and have bay sizes of at least 15,000 square feet.
Office DefinitionsClass A Office: Buildings with steel frame construction, high end exterior finish, distinctive lobbies featuring upgraded
finishes, amenities including on-site security, state-of-the-art communications and data infrastructure and covered parking. Class A buildings are usually multi-story.
Class B Office: Buildings with steel frame, reinforced concrete or concrete tilt-up construction. Class B buildings contain common bathrooms and hallways, and their lobbies may have granite and hardwood detailing. Class B buildings are often multi-story.
Class C Office: Buildings of wood frame construction. Class C buildings are often garden-style and are built around court-yards.
Retail DefinitionsCommunity Center: Retail centers anchored by supermarkets, drug stores and discount department stores. Tenants include off-
price retailers selling apparel, home improvements/furnishings, toys, electronics or sporting goods.
Neighborhood Center: Retail centers anchored by supermarkets and drug stores. Neighborhood centers are intended for convenience shopping for day-to-day needs of consumers.
Power Center: Retail centers dominated by several large anchors including discount department stores, off-price stores, warehouse clubs or “category killers”. Power centers generally inline space.
Strip Center: Unanchored retail centers that are 20,000 SF in size or larger.
Multifamily DefinitionsClass A Multifamily: Buildings constructed in the last 5 years
Class B/C Multifamily: Buildings constructed more than 5 years ago
General DefinitionsVacant SF: Space in a building that is unoccupied and offered for lease by the owner of the company.
Sublease SF: Space in a building that is offered for sublease by the primary tenant. This space may or may not be occupied.
Net Absorption: Difference in occupied square footage from one period to another.
This report and other research materials may be found on our website at www.colliers.com/LasVegas. This quarterly report is a research document of Colliers International | Las Vegas. Questions related to information herein should be directed to the Research Department at +1 702 836 3781. Information contained herein has been obtained from sources deemed reliable and no representation is made as to the accuracy thereof. ©2015 Colliers International
3 Las Vegas Research & Forecast Report | Q3 2016 | Economic Review | Colliers International
Table of Contents
Economic ReviewIs the Light Yellow or Red?
4There are signs that the economy, nationally and globally, and perhaps locally, is slowing. But does this slowing predicate a recession, or just the economy catching its breath?
Industrial ReviewIndustrial Slows Down, But Does Not Stop 8Strong net absorption and rental rate growth in 2015 stimulated new development in 2016.
Office ReviewOffice Improves at a Slower Pace
14Southern Nevada’s office market extended its recovery in the second quarter of 2016, again posting positive net absorption.
Retail ReviewRetail Softens
19Last quarter, we noted that Southern Nevada’s retail market appeared to be back in growth mode, with strong net absorption and five quarters of decreasing vacancy. Oh, what a difference a quarter makes – though fortunately not an immense difference.
MultifamilyMultifamily Back on Track
25According to statistics provided by REIS, multifamily vacancy in Southern Nevada decreased in the first quarter of 2016 (the most recent quarter of available data) after uncharacteristically increasing last quarter.
Medical OfficeMedical Office Continues to Struggle
30Southern Nevada’s medical office market got off to a bad start in 2016, with two quarters of worsening net absorption and rising vacancy.
HospitalityThe Streak Continues 35At mid-year, 2016 is proving that Las Vegas’ winning streak is not over yet.
LandLand Market Improves 40The second quarter of 2016 saw land sales, in terms of acreage sold, continue to increase.
Clark County Economic DataYear Ago Current
Jobs (1000s) (July 2016) 909.9 936.9
Visitor Volume YTD (July 2016) 24.7 MM 25.5 MM
Gaming Revenue YTD (July 2016) $5.6 BB $5.7 BB
Taxable Sales YTD (June 2015) $18.8 BB $19.5 BB
Commercial Occupancy (Q2-2016) 90.5% 91.3%
Source: The Center for Business & Economic Research, UNLV; Colliers International
Recovery Index(Year -Over-Year)
Southern Nevada Keeps Growing
Research & Forecast Report
LAS VEGAS | ECONOMIC REVIEWQ3 2016
While national economic growth continues to be anemic, and the Fed is lowering expectations for 2017, economic growth in Southern Nevada remains strong and is not showing signs of slowing down. Given that a national recession in the near future seems unlikely, we think Southern Nevada’s economy will continue to grow through 2017 and 2018.
5 Las Vegas Research & Forecast Report | Q3 2016 | Economic Review | Colliers International
Employment Change (July 2015 - July 2016)
Southern Nevada CommercialReal Estate Recovery Index
Unemployment in the Las Vegas-Paradise MSA stood at 6.7 percent as of July 2016, down from 7.1 percent in July 2015. The national unemployment figure was 4.9 percent in August 2016, down from 5.1 percent in August 2015. The national labor force participation rate dropped to 62.8 percent in August 2016, a 0.4 point increase from August 2015.
Since July 2015, total employment in Southern Nevada increased by 27,000 jobs, fewer than the 35,300 jobs that were added between July 2014 and July 2015. While 2014 was the strongest year of recovery for Southern Nevada, 2015 has shown solid growth as well, proving that the economic recovery here, while late, remains robust.
On a year-over-year basis, the majority of new jobs created in Southern Nevada were in education and health services (+7,500 jobs), construction (+6,800 jobs) and retail (+4,000 jobs). Job expansions were also experienced in the leisure and hospitality (+3,800 jobs), transportation and warehousing (+2,400 jobs), professional and business services (+900 jobs), wholesale (+700 jobs), financial activities (+500 jobs), manufacturing (+500 jobs) and government (+500 jobs) sectors. Job losses occurred in information (-300 jobs) and other services (-300 jobs). Leisure and hospitality hiring will probably remain light through the remainder of 2016, as expansions in room inventory are also expected to remain light. In 2015, job growth was dominated by the leisure and hospitality and construction sectors. In 2017, it appears to be spread among the trade, transportation and construction (which is good for industrial and retail real estate), health care and the government and education sectors.
While the current construction employment of 57,400 jobs lags well behind the 111,300 construction jobs the Valley had in August of 2006, it has expanded quite a bit since the low of 34,800 construction jobs in early 2012. The industrial and multifamily sectors continue to be the key real estate stimulators of new construction in the Valley, though infrastructure really remains the king in terms of construction job creation in Southern Nevada. Important infrastructure projects are planned to continue for the next year at least, Project Neon a infrustration project in Downtown Las Vegas foremost among them. The coming years will also see construction of new master-planned communities in Henderson, the Northwest and North Las Vegas, the ResortsWorld resort on the Las Vegas “Strip” and well as additional industrial and multifamily projects.
Population growth, a key driver of Southern Nevada’s economy for the past century, may be improving in 2016. According to data provided by the Nevada Department of Motor Vehicles, the average number of out-of-state driver’s licenses turned in each month was 5,130 in 2015. So far in 2016, the average was 5,634 per month, higher than the last peak of 5,481 per month experienced in 2013. While this is still well below levels seen in the years prior to the Great Recession, it is certainly an improvement. The Valley’s improving job market might be the key factor in this increase in immigration into Southern Nevada.
New home sales in the post-recession period have been slowly improving over the past three years, though they remain below the post-recession peak monthly average of 763 in August 2013. New home sales in 2016
The Shops at Crystals | 3720 South Las Vegas Boulevard
averaged 580 homes per month. The median price for new homes has steadily increased over the past three years, and this might be partially to blame for the low sales. Home sellers cannot generate the profits they need at lower prices, and Southern Nevada buyers are finding these higher prices difficult to pay. As a result, existing home sales have been stronger than new homes sales over the past three years, and occupancy of multifamily properties has been more impressive yet, leading to the recent boom in multifamily development.
Visitor volume and gaming revenue continued to improve in Southern Nevada in 2016. Visitor volume is on track to meet or beat visitor volume in 2015, and gaming revenue is ahead of where it was at this point in 2015. Diversification of entertainment in the “Strip” resorts has made gaming revenue less important now than it was in past decades, but it still remains a key sector in Southern Nevada’s economy.
Commercial real estate (i.e. industrial, office and retail) investment sales volume in 2015 reached $1.55 billion in 226 sales totaling 9.1 million square feet at an average price per square foot (ppsf) of $169.78. So far in 2016, investment sales volume was $674 million in 139 sales totaling 4.5 million square feet at an average ppsf of $150.84. This is lower sales volume than over the first three quarters of 2013, 2014 and 2015. Sale volume growth in 2015 was highest for single-tenant retail properties (+45.4 percent) and shopping centers (+44.0 percent), but was also positive for office properties (+13.7 percent). Sales volume growth was negative 17.8 percent for industrial properties in 2015. Current sales volumes suggest negative growth for all sectors in 2016 compared to 2015
Recovery IndexThe recovery index managed four straight months of growth from Apr to Jul 2016, and will probably continue to grow through August and possibly September before beginning the usual winter lull. In June 2016, the index reached 100.2, indicating parity with January 2005, a point before the boom that preceded the Great Recession. For this reason, we think Southern Nevada’s economy is really finished recovering from the Great Recession, and is now in expansion mode.
While the economy may have recovered in the broader sense, it is now a different economy than it was a decade ago. Some measures of the local economy have exceeded their 2005 levels, such as gaming revenue (though it remains below its peak in 2007), employment (with the notable exception of construction employment), visitor volume and taxable sales. Two measures, however, remain well below 2005 levels, namely immigration into Southern Nevada and new home sales. Obviously, these two measures are connected, and they are why construction employment in the Valley is far lower now than it was a decade ago. This has made the local economy more dependent on its hospitality sector than it used to be, which is reason for concern because it makes the Valley more vulnerable to national and even global economic troubles. If immigration into Southern Nevada from the rest of the United States can be increased, the local economy will recover some of the dynamism and fortitude that it lost during the Great Recession.
6 Las Vegas Research & Forecast Report | Q3 2016 | Economic Review | Colliers International
7 Las Vegas Research & Forecast Report | Q3 2016 | Economic Review | Colliers International
Economic Statistics
Las Vegas – Second Quarter 2016
TYPE JULY-16 APRIL-16 JULY-15 2016 AVERAGE 2015 AVERAGE QUARTERLY GROWTH
ANNUAL GROWTH
2015 TO 2016 GROWTH
(AVERAGE)
EMPLOYMENT DATAU.S. Employment 144,448,000 143,915,000 142,115,000 143,962,500 141,960,167 0.4% 1.6% 1.4%
U.S. Unemployment Rate 4.9% 5.0% 5.3% 4.9% 5.3% -2.0% -7.5% -7.3%
Las Vegas MSAEmployment
936,900 936,400 909,900 932,914 916,992 0.1% 3.0% 1.7%
Las Vegas MSA Unemployment Rate
6.7% 6.1% 7.1% 6.3% 6.8% 9.8% -5.6% -7.1%
Las Vegas MSA Construction Employment
57,400 55,100 50,600 55,486 50,875 4.2% 13.4% 9.1%
Las Vegas MSA Hospitality Employment
287,900 283,600 284,100 282,843 281,983 1.5% 1.3% 0.3%
HOUSING/CONSTRUCTION DATANew Home Sales 586 503 583 580 564 16.5% 0.5% 2.8%
New Home Median Price $321,625 $325,307 $305,928 $319,182 $310,451 -1.1% 5.1% 2.8%
Existing Home Sales 2,837 2,818 3,180 2,626 2,573 0.7% -10.8% 2.1%
Existing Home Median Price $236,000 $220,600 $218,000 $225,743 $214,068 7.0% 8.3% 5.5%
Residential Permits 763 1,254 1,029 1,245 884 -39.2% -25.9% 40.8%
Residential Permit Value $88,238,810 $130,203,566 $150,242,849 $131,425,690 $102,255,895 -32.2% -41.3% 28.5%
Commercial Permits 20 32 24 31 27 -37.5% -16.7% 12.4%
Commercial Permit Value $73,253,270 $47,040,225 $76,442,097 $50,320,588 $45,905,940 55.7% -4.2% 9.6%
HOSPITALITY DATAVisitor Volume 3,827,636 3,840,822 3,735,327 3,638,725 3,526,018 -0.3% 2.5% 3.2%
Gaming Revenue $867,204,000 $752,817,000 $786,641,000 $811,984,571 $801,371,923 15.2% 10.2% 1.3%
Room Inventory 149,262 149,262 149,071 149,255 148,862 0.0% 0.1% 0.3%
Hotel/Motel Occupancy 93.7% 89.7% 91.5% 89.8% 87.7% 4.5% 2.4% 2.3%
Passengers (McCarran Int'l Airport)
4,168,391 3,912,116 4,064,096 3,919,094 3,778,734 6.6% 2.6% 3.7%
Convention Attendance 351,791 575,981 301,988 552,340 475,859 -38.9% 16.5% 16.1%
The information contained in this report was provided by sources deemed to be reliable, however, no guarantee is made as to the accuracy or reliability.As new, corrected or updated information is obtained, it is incorporated into both current and historical data, which may invalidate comparison to previously issued reports.
Market Indicators Relative to prior period Q3 2016 Q4 2016*
Vacancy
Net Absorption
Completions
Rental Rate
*Projected
“Underlying economic conditions in Southern Nevada, which had indicated a general economic slow-down are now pointing to stronger quarters ahead …”
TRANSPORTATIONTaxable Sales
-1.5INDUSTRIALEmployment
+4.2%
RESIDENTIALPermit Value
-41.3%
Economic Indicators
Historical Vacancy Rates and Asking Lease Rates
$0.50
$0.52
$0.54
$0.56
$0.58
$0.60
$0.62
$0.64
$0.66
$0.68
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
4 Q 2014
1 Q 2015
2 Q 2015
3 Q 2015
4 Q 2015
1 Q 2016
2 Q 2016
3 Q 2016
Vacancy Asking Rental Rate
Summary Statistics Q3 2016 Las Vegas Market Q3-2015 Q2-2016 Q3-2016
Vacancy Rate 5.9% 5.6% 5.2%
Asking Rent (PSF, NNN) $0.60 $0.62 $0.65
Net Absorption (SF) 1,681,842 778,135 1,020,325
New Completions (SF) 952,290 661,726 640,336
Overall Asking Rents Per Square Foot
Warehouse/Distribution $0.50 $0.54 $0.55
Light Distribution $0.53 $0.58 $0.64
Light Industrial $0.61 $0.63 $0.67
Incubator $0.70 $0.74 $0.79
Flex $0.80 $0.83 $0.83
Industrial Shifts into High Gear
Research & Forecast Report
LAS VEGAS | INDUSTRIALQ3 2016
> Demand for industrial space was much stronger in the third quarter of 2016 than the second
> Demand outstripped new supply, and asking rates are increasing once again
> Speculative construction has not hurt the market, and therefore will continue into 2017
Demand for industrial space, which softened during the first half of 2016, roared back to life in the third quarter. Industrial net absorption stood at 1,020,325 square feet in the third quarter of 2016, bringing year-to-date net absorption up to 2.7 million square feet. While it is unlikely that net absorption in 2016 will reach the level seen in 2015, the boost in demand seen this quarter could continue into next year and help make for a strong 2017. New completions of industrial space totaled 640,336 square feet in the third quarter. Vacancy decreased to 5.2 percent, the lowest it has been since the third quarter of 2007, a decade ago. The weighted average asking rate, after a dip last quarter, climbed back to $0.65 per square foot (psf) on a triple net (NNN) basis.
JULY2015
JULY2016 CHANGE
Construction 50,600 57,400 + 6,800
Manufacturing 21,600 22,100 + 500Transportation & Warehousing 37,900 40,300 + 2,400
Wholesale 21,500 22,200 + 700
Source: Nevada Department of Employment, Training and Rehabilitation
Historical Net Absorption vs.Completions
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1,800,000
2,000,000
4 Q 2014
1 Q 2015
2 Q 2015
3 Q 2015
4 Q 2015
1 Q 2016
2 Q 2016
3 Q 2016
Net Absorption Completions
Occupancy vs.Industrial Employment
89.0%
90.0%
91.0%
92.0%
93.0%
94.0%
95.0%
96.0%
97.0%
98.0%
99.0%
100.0%
140,000
142,000
144,000
146,000
148,000
150,000
152,000
154,000
156,000
158,000
160,000
162,000
4 Q 2014
1 Q 2015
2 Q 2015
3 Q 2015
4 Q 2015
1 Q 2016
2 Q 2016
3 Q 2016
Industrial Jobs Occupancy Rate
Southern Nevada’s industrial job market improved in July 2016 (the latest month of data available) compared with July 2015, adding 10,400 jobs in sectors usually associated with industrial real estate over the past twelve months, including 6,800 of them in the construction sector. The transportation & warehousing sector added 2,400 jobs over the past twelve months, the manufacturing sector added 500 jobs, and the wholesale sector added 700. This represented stronger job growth than one quarter ago. Unemployment in the Las Vegas-Paradise MSA stood at 6.7 percent as of July 2016, down from 7.1 percent in July 2015. From July 2015 to July 2016, total employment in Southern Nevada has increased by 27,000 jobs.
Southern Nevada’s industrial inventory expanded by 640,336 square feet in the third quarter of 2016, bringing total inventory growth in 2016 to almost 2.4 million square feet, up from one year ago. Industrial development has been on the rise over the past three years, and is only growing stronger as continued high demand for product whets the appetites of developers who have had to sit on their hands for nearly a decade. Projects under construction totaled 3.9 million square feet in the third quarter of 2016, and were 36 percent pre-leased or build-to-suit. This is an improvement over last quarter. We anticipate 1.3 million square feet of completions in the fourth quarter of 2016, with 32 percent pre-leasing.
Southern Nevada’s industrial market has now posted positive net absorption every quarter since the fourth quarter of 2012. This streak was extended this quarter with 1,020,325 square feet of net absorption, the strongest quarterly net absorption since the third quarter of 2015. Gross absorption was 2.7 million square feet in the third quarter, which was a decrease from last quarter, but well within the normal range for industrial gross absorption over the past few years.
Net absorption was positive in four of the Valley’s seven submarkets this quarter. The highest net absorption was in North Las Vegas (819,153 square feet), followed by Southwest (292,120 square feet), Airport (33,138 square feet) and Northwest (7,598 square feet). Negative net absorption occurred in Henderson (negative 81,402 square feet), West Central (negative 47,963 square feet) and East Las Vegas (negative 2,319 square feet). Henderson is the submarket to keep an eye on, given that almost 1.5 million square feet of warehouse/distribution product is slated to be completed in that market over the next four quarters with relatively little pre-leasing.
After a long stretch of decreasing vacancy, Southern Nevada’s industrial market wavered a bit in the first half of 2016, probably due to a combination of a softening economy and the completion of 1.8 million square feet of new industrial product, much of it speculative. In the third quarter of 2016, the market got back on track, with the vacancy rate decreasing to 5.2 percent, its lowest level in ten years. Economic growth in Southern Nevada looks stronger now than it did earlier this year, and this has certainly contributed to a stronger demand for industrial space.
9 Las Vegas Research & Forecast Report | Q3 2016 | Industrial | Colliers International
Industrial Development Pipeline
Project Type Submarket Size Pre-Leasing Completion
Under Construction 3,868,000 SF 36%
ProLogis I-15 Speedway Logistics Warehouse/Distribution North Las Vegas 1,127,000 SF 47% Q1-2017
Northgate Distribution Center Warehouse/Distribution North Las Vegas 806,000 SF 50% Q4-2016
South 15 Airport Center Warehouse/Distribution Henderson 482,000 SF 0% Q1-2017
Henderson Freeway Crossings Warehouse/Distribution Henderson 453,000 SF 0% Q4-2016
Henderson Commerce Center IV Warehouse/Distribution Henderson 240,000 SF 56% Q3-2017
ProLogis North 15 Freeway 2 Warehouse/Distribution North Las Vegas 215,000 SF 100% Q3-2017
ProLogis Beltway Distribution Center Warehouse/Distribution Southwest 211,000 SF 0% Q1-2017
ProLogis North 15 Freeway 1 Warehouse/Distribution North Las Vegas 196,000 SF 32% Q3-2017
Sunset 215 West Warehouse/Distribution Southwest 80,000 SF 0% Q2-2017
4700 Eaker Street Light Industrial North Las Vegas 58,000 SF BTS Q1-2017
Planned Construction 6,163,000 SF 16%
ProLogis I-15 Speedway Logistics Warehouse/Distribution North Las Vegas 1,000,000 SF 0% 2017
South 15 Airport Center Warehouse/Distribution Henderson 742,000 SF 0% 2017
LogistiCenter at Las Vegas Blvd Warehouse/Distribution North Las Vegas 549,000 SF 0% Q2-2017
ProLogis Las Vegas Corporate Center Warehouse/Distribution North Las Vegas 525,000 SF 0% Q2-2017
Switch SuperNAP 10 Warehouse/Distribution Southwest 500,000 SF BTS 2017
Sunrise Distribution Center Warehouse/Distribution North Las Vegas 458,000 SF BTS 2017
Blue Diamond Business Center 6 Warehouse/Distribution Southwest 430,000 SF 0% Q2-2017
Henderson Interchange Center Warehouse/Distribution Henderson 364,000 SF 0% Q2-2017
Lincoln Business Center Warehouse/Distribution North Las Vegas 337,000 SF 0% Q2-2017
Las Vegas Digital Exchange Warehouse/Distribution Southwest 296,000 SF 0% Q2-2017
Lone Mountain Corporate Center 2 Warehouse/Distribution North Las Vegas 247,000 SF 0% 2017
Copper Sage Commerce Center Warehouse/Distribution North Las Vegas 91,000 SF 0% 2017
3730 Civic Center Dr Warehouse/Distribution North Las Vegas 90,000 SF 0% 2017
Clayton Park Incubator North Las Vegas 88,000 SF 0% 2017
2800 Sunset Road Light Industrial Airport 54,000 SF 0% 2017
5785 N Hollywood Blvd Warehouse/Distribution North Las Vegas 36,000 SF BTS 2017
Escondido Airport Park Light Industrial Airport 31,000 SF 0% Q2-2017
In 2015, final industrial investment sales volume was $295.8 million in 43 sales that totaled 3.1 million square feet. The average sales price in 2015 was $96.58 psf, and the average cap rate was 7.1 percent, a slight compression from 2014’s average cap rate of 7.3 percent. Year-to-date in 2016, we have seen industrial investment sales volume of only $90.5 million in 25 sales totaling 1.2 million square feet. This gives us an average sales price per square foot of $77.43. The average cap rate in 2016 so far has been 7.3 percent, an increase from last year. Southern Nevada’s industrial market had over 1.3 million square feet of product available for sale as investments, with an average asking price of $108.39 psf, and an average cap rate of 6.4 percent. Demand for industrial space as an investment peaked in 2013, and has been decreasing since then.
After sluggish demand in the first half of 2016, the warehouse/distribution sector revved up in the third quarter and posted 923,550 square feet of net absorption, bringing the year-to-date total to almost 1.9 million square feet. As good as this is, it lags a bit behind last year’s performance. It also lags slightly behind new completions
The industries most active in occupying industrial space over the past twelve months were involved in wholesale (most likely serving the Resort Corridor), transportation and warehousing, and retail. Local companies took about 41 percent of the leased square footage we tracked over this period. Companies headquartered in the Southwest U.S. took 22 percent, while 10 percent from the Great Plains, which includes Texas.
The weighted average asking lease rate for industrial space increased this quarter to $0.65 psf NNN. This was $0.03 higher than one quarter ago, and $0.05 higher than one year ago. If adjusted for inflation, the weighted average asking lease rate is $0.48 psf NNN, a $0.03 increase from one year ago. The current asking rate, adjusted for inflation, is $0.03 lower than it was during the economic recovery that occurred in 2004. Units leased in the third quarter of 2016 had effective lease rates that averaged 98.7 percent of asking rates, a distinct drop from the second quarter’s rate of 110.5 percent, and an indication that the adjustment in asking rates was warranted. Increases in asking rent will continue in 2017.
1 Using the Consumer Price Index, All Urban Consumers, West Region, Class A Cities, 1982-1984 = 100
10 Las Vegas Research & Forecast Report | Q3 2016 | Industrial | Colliers International
“Demand for industrial space, which softened during the first half of 2016, roared back to life in the third quarter.”
- John Stater, Research & GIS Manager
of industrial space in 2016, and as a result warehouse/distribution vacancy is higher this year than last. Third quarter 2016 vacancy was 4.1 percent, a decrease from last quarter, but 0.8 points higher than one year ago. As mentioned above, the warehouse/distribution sector is poised to add another 1.7 million square feet to inventory in the fourth quarter of 2016, with minimal pre-leasing. This will likely drive vacancy rates higher next quarter, and may depress asking rental rate growth.
While the light distribution sector has seen positive net absorption for the past thirteen quarters, net absorption has been decreasing for the past five quarters. Net absorption was only 21,126 square feet in the third quarter, with new completions totaling 130,580 square feet. This drove vacancy up to 6.1 percent from last quarter’s 5.6 percent. Job growth in light distribution-related industries has been strong over the past two years, and this job growth, coupled with weakening demand, suggests that while businesses are adding workers to keep up with demand they as yet do not need to expand their occupancy. Hopefully, that expansion is looming, and fortunately for light distribution owners, there is no impending new supply of light distribution projects on the horizon. The asking rental rate for light distribution space is almost $0.20 higher now than it was two years ago.
The light industrial sector fared about as well as light distribution in the third quarter of 2016, with 26,686 square feet of net absorption. This slowdown in demand was not accompanied by an increase in inventory, so light industrial vacancy continued to fall, reaching 4.9
percent this quarter. The average asking rate increased by $0.04 this quarter to $0.67 psf NNN. A vacancy rate of 4.9 percent would suggest that light industrial development is forthcoming, but land and construction costs are keeping developers at bay for the time being.
The incubator and flex sectors posted very different performance in the third quarter. The incubator sector posted negative 363 square feet – essentially no net absorption – which kept incubator vacancy at 7.9 percent. This remains an improvement over the 10.5 percent vacancy posted one year ago. Flex, on the other hand, posted 49,326 square feet of net absorption, less than last quarter, but still healthy demand. This brought flex vacancy down to 10.7 percent from 11.4 percent one quarter ago and 15.1 percent one year ago.
At mid-year 2016, we questioned whether demand would continue to weaken in 2016. The third quarter answered that question with a powerful “no”. Underlying economic conditions in Southern Nevada, which had indicated a general economic slow-down are now pointing to stronger quarters ahead, which will hopefully mean strong demand for industrial space in the fourth quarter of 2016. With seemingly all pistons firing for the industrial market, the only potential trouble on the horizon is in the Henderson submarket, with 1.5 million square feet of new warehouse/distribution product to be completed next quarter and relatively weak demand to meet it. Demand may pick up, of course, but if it does not there will be slightly elevated vacancy while the market absorbs this space. Fortunately, it is not likely that this product will dampen demand for product in the North Las Vegas and Southwest submarkets.
Investment Sales
2012 2013 2014 2015 2016 YTD*
No. Sales 77 58 82 43 25
Square Feet Sold 2,488,000 5,697,000 3,063,000 3,062,000 1,168,000
Sales Volume $153.4 MM $352.9 MM $272.7 MM $295.8 MM $90.5 MM
Average Price/SF $61.11 $61.94 $89.03 $96.58 $77.43
Average Cap Rate* 8.3% 7.9% 7.3% 7.1% 7.3%
Average Sale Size (SF) 32,000 98,000 37,000 71,000 47,000
*Cap rate on industrial properties available for sale as investments
11 Las Vegas Research & Forecast Report | Q3 2016 | Industrial | Colliers International
NORTHWEST
EASTLAS VEGAS
NORTHLAS VEGAS
SOUTHWEST
WESTCENTRAL
AIRPORT
HENDERSON
15
215
215
95
95
Significant Industrial Sale Activity
3210 E Tropicana Avenue13,000 SF - $2,400,000
$183.00/SF
August 2016
Flex
DW Valley View Business Center185,000 SF - $10,150,000
$55.00/SF
August 2016
Light Industrial
Familian Business Center28,000 SF - $3,900,000
$137.00/SF
July 2016
Warehouse/Distribution
Henderson Corporate Park12,000 SF - $1,663,000
$135.00/SF
August 2016
Light Industrial
Avrio Walnut Center92,000 SF - $5,150,000
$56.00/SF
August 2016
Light Industrial
Lease Activity
Property Name Lease Date Lease Term Size Effective Rate Type
ProLogis North 15 Sep 2016 87 months 215,000 SF $0.41 NNN Warehouse/Distribution
WesTech Business Center II Aug 2016 62 months 19,000 SF $0.74 NNN Light Distribution
DW Valley View Business Center Sep 2016 21 months 15,000 SF $0.43 NNN Light Industrial
Northpoint Business Center Aug 2016 26 months 5,000 SF $0.50 NNN Flex
Masco Park II Jul 2016 72 months 3,000 SF $0.59 NNN Incubator
12 Las Vegas Research & Forecast Report | Q3 2016 | Industrial | Colliers International
Market Comparisons - Las Vegas
Industrial Market
TYPETOTAL
INVENTORYSF
DIRECTVACANT SF
DIRECTVACANCY
RATE
SUBLEASE VACANCY
SF
TOTALVACANT
SF
VACANCYRATE
CURRENT QUARTER
VACANCY RATEPRIOR
QUARTER
NET ABSORPTION
CURRENT QTR SF
NET ABSORPTION
YTDSF
COMPLETIONSCURRENTQTR SF
COMPLETIONS YTD SF
UNDER CONSTRUCTION
SF
PLANNED CONSTRUCTION
SF
WEIGHTEDAVG ASKING
RENTALRATE
AIRPORT SUBMARKET
WH 5,859,231 508,120 8.7% - 508,120 8.7% 8.7% (37,186) 122,972 - - - - $0.63 LD 3,235,360 211,001 6.5% 29,023 240,024 7.4% 8.6% 16,434 46,720 - - - - $0.74 LI 2,972,727 165,875 5.6% - 165,875 5.6% 6.5% 27,974 128,781 - - - 84,897 $0.86 INC 1,500,100 197,538 13.2% 1,366 198,904 13.3% 12.8% (9,310) 39,242 - - - - $1.02 FLX 1,509,068 202,665 13.4% - 202,665 13.4% 15.9% 35,226 44,115 - - - - $0.98 Total 15,076,486 1,285,199 8.5% 30,389 1,315,588 8.7% 9.4% 33,138 381,830 - - - 84,897 $0.79
EAST LAS VEGAS SUBMARKET
WH 1,115,454 25,183 2.3% - 25,183 2.3% 5.3% 34,000 29,729 - - - - $0.55 LD 532,163 48,288 9.1% - 48,288 9.1% 3.8% (28,192) (41,788) - - - - $0.54 LI 1,797,521 79,540 4.4% - 79,540 4.4% 4.3% (1,684) (24,650) - - - - $0.88 INC 281,755 30,230 10.7% - 30,230 10.7% 9.8% (2,573) 4,935 - - - - $0.55 FLX 233,692 27,621 11.8% - 27,621 11.8% 10.2% (3,870) (12,444) - - - - $0.52 Total 3,960,585 210,862 5.3% - 210,862 5.3% 5.3% (2,319) (44,218) - - - - $0.67
HENDERSON SUBMARKET
WH 6,923,114 216,815 3.1% 40,170 256,985 3.7% 2.5% (135,082) 68,511 - 232,826 1,175,410 1,068,190 $0.54 LD 1,634,138 109,945 6.7% 10,961 120,906 7.4% 8.7% 3,597 (25,326) - - - - $0.57 LI 3,676,846 183,665 5.0% - 183,665 5.0% 6.1% 39,361 15,875 - - - - $0.69 INC 497,448 12,443 2.5% - 12,443 2.5% 3.6% 2,872 20,488 - - - - $0.70 FLX 1,341,046 78,941 5.9% 12,739 91,680 6.8% 8.8% 7,850 69,257 - - - - $0.86 Total 14,072,592 601,809 4.3% 63,870 665,679 4.7% 4.8% (81,402) 148,805 - 232,826 1,175,410 1,068,190 $0.64
NORTH LAS VEGAS SUBMARKET
WH 22,003,335 616,981 2.8% 0 616,981 2.8% 4.6% 843,827 1,077,604 475,291 1,308,041 2,343,490 3,333,484 $0.44 LD 5,043,100 337,808 6.7% 0 337,808 6.7% 7.4% 31,146 113,399 - - - - $0.53 LI 9,040,023 381,294 4.2% 12,970 394,264 4.4% 4.1% -51,984 143,980 - - 58,000 - $0.51 INC 724,573 96,641 13.3% 0 96,641 13.3% 12.1% -9,280 (14,047) - 12,900 - 87,900 $0.63 FLX 796,116 109,821 13.8% 3,456 113,277 14.2% 14.5% 5,444 21,888 - - - - $0.61 Total 37,607,147 1,542,545 4.1% 16,426 1,558,971 4.1% 5.2% 819,153 1,342,824 475,291 1,320,941 2,401,490 3,421,384 $0.50
NORTHWEST SUBMARKET
WH 224,906 - 0.0% - - 0.0% 0.0% - - - - - - $- LD 50,000 12,159 24.3% - 12,159 24.3% 24.3% - (8,359) - - - - $0.98 LI 341,430 24,738 7.2% - 24,738 7.2% 9.4% 7,247 9,687 - - - - $0.64 INC 99,427 7,465 7.5% - 7,465 7.5% 8.0% 448 (5,452) - - - - $0.84 FLX 740,230 76,920 10.4% 13,474 90,394 12.2% 10.4% (97) 52,198 - - - - $0.76 Total 1,455,993 121,282 8.3% 13,474 134,756 9.3% 8.9% 7,598 48,074 - - - - $0.76
SOUTHWEST SUBMARKET
WH 14,892,645 790,033 5.3% 37,338 827,371 5.6% 6.7% 217,991 583,619 34,465 721,990 291,438 1,225,500 $0.60 LD 7,341,324 351,654 4.8% 187,717 539,371 7.3% 5.8% 27,221 128,828 130,580 130,580 - - $0.74 LI 10,504,308 486,470 4.6% 8,040 494,510 4.7% 5.2% 56,182 132,224 - - - - $0.70 INC 2,353,108 131,104 5.6% 3,497 134,601 5.7% 5.1% (14,047) 9,914 - - - - $0.71 FLX 1,685,955 176,316 10.5% - 176,316 10.5% 11.0% 4,773 (7,230) - - - - $0.85 Total 36,777,340 1,935,577 5.3% 236,592 2,172,169 5.9% 6.2% 292,120 847,355 165,045 852,570 291,438 1,225,500 $0.68
WEST CENTRAL SUBMARKET
WH 2,255,565 17,283 0.8% 11,334 28,617 1.3% 1.3% - - - - - - $0.33 LD 999,187 83,937 8.4% - 83,937 8.4% 5.5% (29,080) 3,520 - - - - $0.50 LI 7,852,918 469,367 6.0% - 469,367 6.0% 5.3% (50,410) (96,293) - - - - $0.67 INC 2,511,825 151,005 6.0% - 151,005 6.0% 7.8% 31,527 38,772 - - - - $0.72 FLX 161,527 16,802 10.4% - 16,802 10.4% 10.4% - 6,677 - - - - $0.81 Total 13,781,022 738,394 5.4% 11,334 749,728 5.4% 5.2% (47,963) (47,324) - - - - $0.66
MARKET TOTAL
WH 53,274,250 2,174,415 4.1% 88,842 2,263,257 4.2% 5.2% 923,550 1,882,435 509,756 2,262,857 3,810,338 5,627,174 $0.55 LD 18,835,272 1,154,792 6.1% 227,701 1,382,493 7.3% 7.0% 21,126 216,994 130,580 130,580 - - $0.64 LI 36,185,773 1,790,949 4.9% 21,010 1,811,959 5.0% 5.1% 26,686 309,604 - - 58,000 84,897 $0.67 INC 7,968,236 626,426 7.9% 4,863 631,289 7.9% 8.1% (363) 93,852 - 12,900 - 87,900 $0.79 FLX 6,467,634 689,086 10.7% 29,669 718,755 11.1% 12.0% 49,326 174,461 - - - - $0.83 Total 122,731,165 6,435,668 5.2% 372,085 6,807,753 5.5% 6.0% 1,020,325 2,677,346 640,336 2,406,337 3,868,338 5,799,971 $0.65
QUARTERLY COMPARISON AND TOTALS
Q3-16 122,731,165 6,435,668 5.2% 372,085 6,807,753 5.5% 6.0% 1,020,325 2,677,346 640,336 2,406,337 3,868,338 5,799,971 $0.65
Q2-16 122,090,829 6,815,657 5.6% 514,396 7,330,053 6.0% 6.0% 778,135 1,657,021 661,726 1,766,001 1,940,708 5,764,758 $0.62
Q1-16 121,429,103 6,932,066 5.7% 380,928 7,312,994 6.0% 5.7% 878,886 878,886 1,104,275 1,104,275 1,446,539 5,155,620 $0.65 Q4-15 120,324,828 6,706,677 5.6% 110,304 6,816,981 5.7% 6.3% 515,907 4,949,710 173,608 1,900,601 2,224,326 4,361,662 $0.63 Q3-15 120,151,220 7,048,976 5.9% 467,329 7,516,305 6.3% 6.9% 1,681,842 4,433,803 952,290 1,726,993 1,689,817 6,390,005 $0.60 Q2-15 119,198,930 7,778,528 6.5% 406,957 8,185,485 6.9% 7.7% 1,851,470 2,751,961 774,703 774,703 1,731,785 5,453,451 $0.57 Q1-15 118,424,227 8,855,295 7.5% 294,896 9,150,191 7.7% 8.5% 900,491 900,491 - - 1,633,705 6,665,344 $0.57
WH = Warehouse LD = Light Distribution LI = Light Industrial INC = Incubator FLX = Flex
13 Las Vegas Research & Forecast Report | Q3 2016 | Industrial | Colliers International
+7.9%
O�ceEmployment
O�ceSF/Job
SubleaseVacancy
-5.4%
Q32016
-17.7
“All signs point to continued steady improvement in the office market through 2017.”
Market Indicators Relative to prior period Q3 2016 Q4 2016*
VACANCY
NET ABSORPTION
COMPLETIONS
RENTAL RATE
*Projected
Economic Indicators
Historical Vacancy Rates and Asking Lease Rates
$1.75
$1.80
$1.85
$1.90
$1.95
$2.00
$2.05
15.0%
16.0%
17.0%
18.0%
19.0%
20.0%
21.0%
3 Q 2014
4 Q 2014
1 Q 2015
2 Q 2015
3 Q 2015
4 Q 2015
1 Q 2016
2 Q 2016
3 Q 2016
Vacancy Asking Rental Rate
Summary Statistics Q3 2016 Las Vegas Market Q3-2015 Q2-2016 Q3-2016
Vacancy Rate 18.2% 17.6% 17.1%
Asking Rent (PSF, NNN) $1.94 $1.99 $2.01
Net Absorption (SF) 212,326 156,809 210,859
New Completions (SF) 46,650 164,663 0
Overall Asking Rents Per Square Foot
Class A $2.63 $2.68 $2.67
Class B $1.95 $2.00 $2.04
Class C $1.63 $1.68 $1.68
Office Market Continues to Improve
Research & Forecast Report
LAS VEGAS | OFFICEQ3 2016
> Southern Nevada’s office market is improving at a steady rate
> Net absorption has been positive in twelve of the last thirteen quarters, and has totaled almost 2 million square feet in the past three years
> Steady improvements in demand and a lack of new supply have contributed to year-over-year rent growth
Southern Nevada’s office market continues to emulate the local desert tortoise, with slow and steady improvement that actually picked up steam in the third quarter of 2016. Vacancy continued its three quarter downward trend, hitting 17.1 percent in the third quarter, 1.1 points lower than one year ago. This was on 210,859 square feet of net absorption and no new completions. Continued improvements in demand have driven asking rates steadily upward as well, hitting $2.01 per square foot (psf) on a Full Service Gross (FSG) basis this quarter.
Southern Nevada’s office job market improved in July 2016 (the latest month of data available) compared with July 2015, but at a slower pace than in recent months. The office job market added approximately 5,600 jobs in the past twelve months, with the largest
Historical Net Absorption vs.Completions
Occupancy vs.Office Employment
JUL 2015 JUL 2016 CHANGE
Information 10,200 9,900 - 300
Financial Activities 45,600 46,100 + 500Professional & Business Services 123,500 124,400 + 900
Health Care 59,000 63,500 + 4,500
Source: Nevada Department of Employment, Training and Rehabilitation
-200,000
-100,000
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
3 Q 2014
4 Q 2014
1 Q 2015
2 Q 2015
3 Q 2015
4 Q 2015
1 Q 2016
2 Q 2016
3 Q 2016
Net Absorption Completions
78.0%
79.0%
80.0%
81.0%
82.0%
83.0%
84.0%
100,000
105,000
110,000
115,000
120,000
125,000
130,000
3 Q 2014
4 Q 2014
1 Q 2015
2 Q 2015
3 Q 2015
4 Q 2015
1 Q 2016
2 Q 2016
3 Q 2016
Office Jobs Occupancy Rate
contribution coming from the health care sector (+4,500 jobs), and with the information sector losing 300 jobs. The professional and business services sector, which had shown very strong growth over the past year, added only 900 new jobs year-over-year, and the financial services sector added 500 jobs. Unemployment in the Las Vegas-Paradise MSA stood at 6.7 percent as of July 2016, down from 7.1 percent in July 2015. From July 2015 to July 2016, total employment in Southern Nevada has increased by 27,000 jobs.
There was no new office inventory completed in the third quarter of 2016. The market had 203,000 square feet of office space under construction, almost 90 percent of it speculative. The pace of construction has been slower than expected due to high land and construction costs, as well as continued overall high vacancy rates. We think 134,000 square feet of office space will be completed in the fourth quarter of 2016, with another 69,000 square feet completed in early 2017.
Southern Nevada’s office market had 210,859 square feet of net absorption in the third quarter of 2016, bringing net absorption year-to-date to 640,796 square feet. This was the seventh straight quarter of positive net absorption for the office market, and the market has had positive net absorption in twelve of the last thirteen quarters.
In the third quarter of 2016, net absorption was highest in the Southwest submarket (111,862 square feet), followed by North Las Vegas (61,303 square feet) and Henderson (51,885 square feet). Negative net absorption was experienced in the Airport (negative 90,906 square feet) and Downtown (negative 35,184 square feet).
Demand for office space over the past twelve months came primarily from manufacturing, professional and business services, and financial activities, especially mortgage and title companies. Mortgage and title companies have been stimulated by the recent expansion of the Valley’s construction industry. Manufacturing includes printing and publishing, which includes digital media like websites, hence the strong office demand of manufacturing. The trend of taking less space per office employee remains a headwind to office market growth, but Southern Nevada’s office users appear to be in expansion mode, offsetting that trend somewhat.
Positive net absorption drove the office vacancy rate down this quarter to 17.1 percent due to positive net absorption and a lack of new supply. Current vacancy is 1.1 percentage points lower than one year ago. At recent rates of net absorption, the office market will stabilize at 9.0 percent vacancy (the pre-recession average) in approximately 4.7 years.
Investment Sales Activity
2012 2013 2014 2015 2016 YTD*
No. Sales 87 90 71 68 36
Square Footage 3,929,000 3,512,000 2,505,000 2,044,000 1,009,000
Sales Volume $261.0 MM $571.9 MM $296.4 MM $384.1 MM $129.1 MM
Average Price/SF $89.11 $162.83 $118.32 $187.88 $127.96
Average Cap Rate* 8.2% 7.6% 7.7% 7.5% 7.8%
Average Sale Size (SF) 34,000 39,000 35,000 30,000 28,000
15 Las Vegas Research & Forecast Report | Q3 2016 | Office | Colliers International
Office Development Pipeline
Project Type Submarket Size (SF) Status Completion
Supreme Court Building Class B Downtown 27,000 Under Construction Q1-2017
Build-To-Suit Total 27,000
Tivoli Village Class A Northwest 134,000 Under Construction Q4-2016
Centennial Hills Center Class B Northwest 124,000 Planned 2017
The Square Class C Southwest 80,000 Planned 2017
Pace Plaza Class B Southwest 42,000 Under Construction Q1-2017
Seven Hills Plaza D Class B Henderson 42,000 Planned 2017
Cadence Class C Henderson 30,000 Planned 2017
Speculative Total 452,000
Office Total 479,000
“All signs point to continued steady improvement in the office market through 2017.”- John Stater, Research & GIS Manager
compared to the Southwest’s $2.24 psf FSG. The Valley’s lowest average asking rate is in the West Central submarket, at $1.71 psf FSG.
Office space available for sublease increased this quarter to 396,736 square feet, but was still 17.7 percent lower than it was one year ago. Sublease availability increased significantly in the first quarter of 2014 when Citibank’s call center operations center in the Northwest was put on the market. It then decreased significantly earlier this year with the sublease of 138,000 square feet at 8725 W Sahara Avenue to Sutherland Global Services.
Office investment sales remained subdued in the third quarter of 2016. So far in 2016, sales volume totaled $129.1 million in 36 sales totaling 1,009,000 square feet with an average price per square foot of $127.96 and an average cap rate of 7.8 percent. The significant decrease in average price is due to the sale of a large building in the Downtown submarket at a low price per square foot earlier this year. In general, investment sales in Southern Nevada are shifting to smaller buildings. In the third quarter of 2016, there was almost 2 million square feet of office space available for sale with an average asking price of $174.73 psf and an average cap rate of 6.9 percent.
The only problem with Southern Nevada’s office market at the moment is that its improvement is slow. With the industrial market on fire, it is easy to forget just how much improvement has occurred in the office market over the past three years, to the tune of almost 2 million square feet of net absorption, a more than 3 point drop in vacancy and a 7.5 percent increase in asking rates. All signs point to continued steady improvement in the office market through 2017.
Office vacancy decreased in six of the Valley’s eight submarkets in the third quarter of 2016, with the relatively small North Las Vegas submarket experiencing the largest decrease (7.8 percentage points), followed by Southwest (1.6 points) and Henderson (1.0 points). Vacancy increased in the Airport (1.4 points) and Downtown (0.7 points) submarkets.
The Valley’s lowest vacancy rate was still in Downtown, at 12.8 percent, while West Central had the Valley’s highest vacancy rate at 20.4 percent. Over the next few years, the East Las Vegas submarket should see the completion of a major expansion and renewal of the Las Vegas Convention Center, the completion of the nearby World Resorts property on the “Strip” and the potential construction of a new stadium near McCarran International Airport. This activity in Midtown Las Vegas could stimulate demand for office space in the Airport and East Las Vegas submarkets.
Vacancy in Class A office stood at 21.4 percent in the third quarter of 2016 after especially anemic net absorption of 3,685 square feet. Year-over-year, Class B product saw vacancy decrease by 1.1 percentage points to 17.5 percent, while vacancy in Class C office vacancy decreased by 1.0 percentage point to 15.4 percent.
The weighted average asking rental rate for office space in Southern Nevada decreased to $2.01 per square foot (psf) on a full service gross (FSG) basis in the third quarter of 2016, a $0.05 psf increase from one year ago and a $0.02 increase from one quarter ago. Downtown wrested the title of most expensive submarket this quarter from the Southwest, with Downtown’s asking rental rate hitting $2.25 psf FSG
16 Las Vegas Research & Forecast Report | Q3 2016 | Office | Colliers International
NORTHWEST
EASTLAS VEGAS
NORTHLAS VEGAS
SOUTHWEST
WESTCENTRAL
AIRPORT
HENDERSON
DOWNTOWNSUMMERLIN
15
215
215
95
95
Significant Office Sale Activity
4801 Sandhill Road13,000 SF - $1,300,000
$104.00/SF
August 2016
Class C
Pointe North27,000 SF - $3,300,000
$124.00/SF
July 2016
Class C
Horizon Ridge Prof. Park8,000 SF - $2,300,000
$265.00/SF
July 2016
Class C
JBA Office Plaza28,000 SF - $6,100,000
$222.00/SF
July 2016
Class C
10501 W. Gowan Road31,000 SF - $4,700,000
$151.00/SF
July 2016
Class B
Lease Activity
Property Name Lease Date Lease Term Size Lease Rate Type
Green Valley Civic Center Jul 2016 60 months 31,000 SF $0.75 NNN Class B
Pointe Flamingo Jul 2016 15 months 11,000 SF $0.75 NNN Class B
Sienna Gardens Jul 2016 84 months 7,000 SF $2.01 NNN Class B
The Courtyards on Eastern Aug 2016 126 months 7,000 SF $1.34 FSG Class C
Jones Post Office Complex Jul 2016 72 months 6,000 SF $1.01 NNN Class C
17 Las Vegas Research & Forecast Report | Q3 2016 | Office | Colliers International
Market Comparisons - Las Vegas
Office Market
CLASS TOTAL INVENTORY SF
DIRECT VACANT SF
DIRECT VACANCY
RATE
SUBLEASE VACANT SF
TOTAL VACANT SF
VACANCY RATE CURRENT QUARTER
VACANCY RATE PRIOR QUARTER
NET ABSORPTION
CURRENT QTR SF
NET ABSORPTION
YTD SF
COMPLETIONS CURRENT QTR SF
COMPLETIONS YTD SF
UNDER CONSTRUCTION
SF
PLANNED CONSTRUCTION
SF
WEIGHTED AVG ASKING
RENTAL RATE
AIRPORT SUBMARKET
A 729,174 240,489 33.0% - 240,489 33.0% 32.0% (9,248) (3,367) - - - - $2.81 B 2,407,975 281,414 11.7% 17,662 299,076 12.4% 8.9% (91,581) 2,205 - - - - $2.02 C 3,184,613 512,081 16.1% 19,155 531,236 16.7% 17.0% 9,923 29,774 - - - - $1.71 Total 6,321,762 1,033,984 16.4% 36,817 1,070,801 16.9% 15.6% (90,906) 28,612 - - - - $2.05
DOWNTOWN SUBMARKET
A 1,232,341 240,596 19.5% - 240,596 19.5% 15.9% (44,176) 104,236 - 129,000 - - $2.80 B 2,329,107 240,152 10.3% - 240,152 10.3% 11.2% 20,674 3,903 - - 26,600 - $2.11 C 1,432,337 156,878 11.0% 3,400 160,278 11.2% 10.4% (11,682) 12,208 - - - - $1.61 Total 4,993,785 637,626 12.8% 3,400 641,026 12.8% 12.1% (35,184) 120,347 - 129,000 26,600 - $2.25
EAST LAS VEGAS SUBMARKET
A 1,353,083 270,319 20.0% 37,267 307,586 22.7% 20.7% 6,005 58,020 - - - - $2.91 B 1,542,404 437,295 28.4% - 437,295 28.4% 28.9% 4,696 42,773 - - - - $1.39 C 2,629,026 454,824 17.3% 3,563 458,387 17.4% 18.1% 20,312 40,858 - - - - $1.44 Total 5,524,513 1,162,438 21.0% 40,830 1,203,268 21.8% 21.7% 31,013 141,651 - - - - $1.76
HENDERSON SUBMARKET
A 583,905 179,175 30.7% 2,431 181,606 31.1% 29.9% -4,330 (13,294) - - - - $2.65 B 2,566,015 394,493 15.4% 5,000 399,493 15.6% 17.9% 60,173 52,380 - - - 42,000 $2.16 C 2,227,680 386,890 17.4% 3,876 390,766 17.5% 17.3% -3,958 (4,922) - - - 30,000 $1.70 Total 5,377,600 960,558 17.9% 11,307 971,865 18.1% 19.0% 51,885 34,164 - - - 72,000 $2.07
NORTH LAS VEGAS SUBMARKET
A - - n/a - - n/a n/a - - - - - - $- B 245,696 33,150 13.5% - 33,150 13.5% 37.8% 59,621 64,500 - - - - $1.97 C 543,389 97,906 18.0% - 97,906 18.0% 18.3% 1,682 (30,283) - - - - $1.56 Total 789,085 131,056 16.6% - 131,056 16.6% 24.4% 61,303 34,217 - - - - $1.66
NORTHWEST SUBMARKET
A 1,825,415 412,192 22.6% 52,919 465,111 25.5% 23.0% 6,436 49,529 - - 134,003 - $2.36 B 3,537,640 579,119 16.4% 1,200 580,319 16.4% 17.9% 23,145 (54,675) - - - 87,000 $2.17 C 3,352,556 421,523 12.6% 8,917 430,440 12.8% 12.9% 6,047 33,045 - 10,700 - 37,100 $1.76 Total 8,715,611 1,412,834 16.2% 63,036 1,475,870 16.9% 17.0% 35,628 27,899 - 10,700 134,003 124,100 $2.10
SOUTHWEST SUBMARKET
A 597,112 25,163 4.2% 10,098 35,261 5.9% 14.1% 48,998 65,580 - - - - $2.74 B 2,997,298 644,160 21.5% 17,644 661,804 22.1% 22.3% (4,122) (8,216) - 35,663 42,000 - $2.40 C 3,513,211 480,130 13.7% 19,318 499,448 14.2% 16.0% 66,986 81,114 - - - 85,202 $2.00 Total 7,107,621 1,149,453 16.2% 47,060 1,196,513 16.8% 18.5% 111,862 138,478 - 35,663 42,000 85,202 $2.24
WEST CENTRAL SUBMARKET
A 157,624 18,803 11.9% - 18,803 11.9% 11.9% - 6,358 - - - - $2.46 B 1,922,915 463,897 24.1% - 463,897 24.1% 26.4% 43,703 144,088 - - - - $1.87 C 3,007,707 554,599 18.4% 2,420 557,019 18.5% 18.6% 1,555 (35,018) - - - - $1.56 Total 5,088,246 1,037,299 20.4% 2,420 1,039,719 20.4% 21.4% 45,258 115,428 - - - - $1.71 MARKET TOTALA 6,478,654 1,386,737 21.4% 102,715 1,489,452 23.0% 21.7% 3,685 267,062 - 129,000 134,003 - $2.67 B 17,549,050 3,073,680 17.5% 41,506 3,115,186 17.8% 18.7% 116,309 246,958 - 35,663 68,600 129,000 $2.04 C 19,890,519 3,064,831 15.4% 60,649 3,125,480 15.7% 16.1% 90,865 126,776 - 10,700 - 152,302 $1.68 Total 43,918,223 7,525,248 17.1% 204,870 7,730,118 17.6% 18.0% 210,859 640,796 - 175,363 202,603 281,302 $2.01
QUARTERLY COMPARISON AND TOTALS
Q3-16 43,918,223 7,525,248 17.1% 204,870 7,730,118 17.6% 18.0% 210,859 640,796 - 175,363 202,603 281,302 $2.01
Q2-16 43,918,223 7,736,107 17.6% 157,956 7,894,063 18.0% 18.1% 156,809 429,937 164,663 175,363 202,603 421,140 $1.99
Q1-16 43,753,560 7,728,253 17.7% 192,126 7,920,379 18.1% 18.7% 273,128 273,128 10,700 10,700 325,266 463,140 $2.00 Q4-15 43,742,860 7,990,681 18.3% 197,676 8,188,357 18.7% 18.6% 82,364 993,554 123,617 369,607 197,000 485,140 $1.96 Q3-15 43,619,243 7,949,428 18.2% 150,546 8,099,974 18.6% 19.0% 212,326 911,190 46,650 245,990 242,000 435,140 $1.94 Q2-15 43,572,593 8,115,104 18.6% 182,799 8,297,903 19.0% 19.2% 82,173 698,864 (13,548) 199,340 300,444 435,140 $1.91 Q1-15 43,586,141 8,210,825 18.8% 172,615 8,383,440 19.2% 20.2% 616,691 616,691 212,888 212,888 300,444 310,140 $1.89
18 Las Vegas Research & Forecast Report | Q3 2016 | Office | Colliers International
$1.22
$1.24
$1.26
$1.28
$1.30
$1.32
$1.34
7.5%
8.0%
8.5%
9.0%
9.5%
10.0%
10.5%
4 Q 2014 1 Q 2015 2 Q 2015 3 Q 2015 4 Q 2015 1 Q 2016 2 Q 2016 3 Q 2016
Vacancy Asking Rental Rate
Historical Vacancy Rates and Asking Lease Rates
Market Indicators Relative to prior period Q3 2016 Q4 2016*
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE
*Projected
Summary Statistics Q3 2016 Las Vegas Market Q3-2015 Q2-2016 Q3-2016
Vacancy Rate 9.6% 9.2% 8.6%
Asking Rent (PSF, NNN) $1.27 $1.31 $1.33
Net Absorption (SF) 138,267 -37,367 408,766
New Completions (SF) 55,000 0 71,069
Overall Asking Rents Per Square Foot
Power Center $1.58 $1.50 $1.52
Community Center $1.20 $1.26 $1.27
Neighborhood Center $1.35 $1.44 $1.48
Strip Retail $1.16 $1.17 $1.18
Retail Expansion Continues
Research & Forecast Report
LAS VEGAS | RETAILQ3 2016
> After lighter demand for retail in early 2016, the third quarter was one of retail’s best quarters in many years
> Strong net absorption drove vacancy below 9 percent
> Asking rental rates increased at a moderate pace
“Whether the second quarter was a fluke or a breather, the market got back on track in the third quarter, posting very strong net absorption numbers.”
After a brief pause last quarter, Southern Nevada’s retail market continued to grow in the third quarter, with 408,766 square feet of net absorption driving vacancy down to 8.6 percent. Since 2012, Southern Nevada has experienced only three quarters of negative net absorption. This represents four years of retail expansion after four years of negative results during and just after the Great Recession. We believe the current expansion is just getting started. Market expansion has helped rental rates grow at a moderate pace. The asking rental rate for retail space in the third quarter of 2015 was $1.33 per square foot (psf) on a triple-net (NNN) basis, $0.02 higher than one quarter ago, and $0.06 higher than one year ago.
+3.5%
RETAILTaxable Sales
RETAILEmployment
+2.6
RETAILSF/Job
+1.4%
Q32016
Economic Indicators
Historical Net Absorption vs.Completions
-300,000
-200,000
-100,000
0
100,000
200,000
300,000
400,000
500,000
4 Q 2014 1 Q 2015 2 Q 2015 3 Q 2015 4 Q 2015 1 Q 2016 2 Q 2016 3 Q 2016
Net Absorption Completions
Occupancy vs.Retail Employment
83.0%
84.0%
85.0%
86.0%
87.0%
88.0%
89.0%
90.0%
91.0%
92.0%
75,000
76,000
77,000
78,000
79,000
80,000
81,000
82,000
83,000
84,000
4 Q 2014 1 Q 2015 2 Q 2015 3 Q 2015 4 Q 2015 1 Q 2016 2 Q 2016 3 Q 2016
Retail Jobs Occupancy Rate
According to the Nevada Department of Employment, Training and Rehabilitation, Southern Nevada’s retail job market improved in July 2016 (the latest month of data available) compared with July 2015, adding approximately 4,000 jobs in the past twelve months. The largest increase was in food services and drinking places, which expanded by 3,400 jobs over the past twelve months. Gains outside of food service were more modest, with general merchandise stores adding 900 jobs, food and beverage stores 900 jobs and health and personal care stores 400 jobs. Unemployment in the Las Vegas-Paradise MSA stood at 6.7 percent as of July 2016, down from 7.1 percent in July 2015. From July 2015 to July 2016, total employment in Southern Nevada has increased by 27,000 jobs.
The Nevada Department of Taxation reports that Clark County’s taxable retail sales for the second quarter of 2016 (the most recent quarter of data available) totaled $6.1 billion, up from $6.0 billion in taxable retail sales in the second quarter of 2015. The highest year-over-year growth in taxable retail sales in June 2016 were in home furnishings stores (20.6 percent growth), miscellaneous retail (15.7 percent growth) and electronics and appliance stores (15.2 percent growth). Year-over-year taxable sales decreased in clothing stores (negative 4.6 percent growth). Non-store retailers, by comparison, managed 21 percent growth year-over-year in June 2016.
Retail completions in the third quarter consisted of a 52,000 square foot expansion of the Decatur 215 community center in the Northwest submarket, and the completion of the Upscale Retail Plaza, a 19,069 square foot strip center in the Southwest submarket. Forward supply stood at 1.6 million square feet, which would represent a healthy expansion of Southern Nevada’s retail inventory if it was all completed. All of this retail product is planned to begin construction in the next twelve months.
Net absorption totaled 408,766 square feet in the third quarter of 2016, bringing year-to-date net absorption to 654,996 square feet, higher than net absorption for all of 2015. Net absorption was positive in six of the Valley’s eight submarkets, with only the Downtown and Northeast submarkets posting negative net absorption in the third quarter. Net absorption was highest this quarter in the Southwest submarket (128,027 square feet), followed by the Northwest and Henderson submarkets, which absorbed 96,807 square feet and 89,242 square feet respectively. Strong multifamily development in the I-215 corridor, stretching from Henderson to the Northwest, should stimulate demand for retail space over the next 12-24 months in the aforementioned submarkets. Southern Nevada’s retail market seems to alternate, quarter to quarter, in favoring growing submarkets, like Henderson, Southwest and Northwest, versus well established submarkets, like University East, West Central and Northeast.
Gross absorption of retail product totaled just over 1 million square feet in the third quarter of 2016, just a bit more than in the first and second quarters of 2016. Gross absorption has been on the rise for the past three years. Year-to-date, gross absorption has been highest in the Northwest (660,680 square feet), Henderson (550,245 square feet) and Southwest (458,828 square feet), and lowest in Downtown (96,716 square feet).
20 Las Vegas Research & Forecast Report | Q3 2016 | Retail | Colliers International
Retail Development Pipeline
Project Type Submarket Size (SF) Completion
St Rose Square (St Rose & Amigo) Neighborhood Henderson 466,000 2017
The Edge (Blue Diamond & Buffalo) Community Southwest 296,000 2017
Cadence Village Center (Lake Mead & Warm Springs) Neighborhood Henderson 153,000 2017
Silverado Promenade (Las Vegas & Silverado Ranch) Neighborhood University East 130,000 2017
Union Village (Galleria & Gibson) Strip Henderson 125,000 2017
DCs Plaza (Durango & Farm) Neighborhood Northwest 73,000 2017
Silverado Ranch Boulevard (Silverado Ranch & Bermuda) Strip University East 66,000 2017
Blue Diamond Ranch II (Blue Diamond & Decatur) Strip Southwest 53,000 2017
Buffalo Plaza (Buffalo & Warm Springs) Strip Southwest 53,000 2017
1540 W Sunset Rd Strip Southwest 42,000 2017
Sahara Crossing (Maryland & Sahara) Strip University East 41,000 2017
University Gateway (Maryland & Harmon) Strip University East 39,000 2017
Centennial Hills Center (Durango & Grand Montecito) Strip Northwest 31,000 2017
Planned Construction Total 1,568,000
Single Tenant Retail 2012 2013 2014 2015 2016 YTD
No. Sales 25 53 65 58 50
Square Footage Sold 319,000 984,000 545,000 838,000 479,000
Sales Volume $78.2 MM $153.8 MM $193.9 MM $274.8 MM $134.4 MM
Average Price/SF $244.81 $156.34 $355.76 $327.81 $280.54
Average Sale Size (SF) 13,000 18,600 8,400 14,000 9,600
Cap Rate 7.2% 7.2% 7.3%
Shopping Center Retail 2012 2013 2014 2015 2016 YTD
No. Sales 30 48 59 58 28
Square Footage Sold 1,781,000 3,892,000 2,602,000 3,195,000 1,814,000
Sales Volume $194.0 MM $378.4 MM $408.3 MM $588.1 MM $320.3 MM
Average Price/SF $108.90 $97.21 $156.89 $184.08 $176.79
Average Sale Size (SF) 59,000 81,000 44,000 55,000 65,000
Cap Rate 8.9% 7.7% 7.0%
burgeoning Southwest submarket. All other submarkets had vacancy rates between 7.2 percent and 9.8 percent, showing remarkable consistency Valley-wide. All submarkets but Downtown either saw vacancy decrease or remain stable in the third quarter.
The average asking rental rate for retail space in Southern Nevada was $1.33 psf NNN in the third quarter of 2016. This was $0.02 higher than in the second quarter of 2016, and $0.06 higher than one year ago. Adjusting for inflation, asking rental rates are now $0.97 psf NNN in 2002 dollars, $0.43 psf lower than they were in 2002.
Over the past quarter, five submarkets saw asking rates increase — Southwest ($0.09 psf), Henderson ($0.05 psf), North Las Vegas ($0.05 psf), Northeast ($0.04 psf), and West Central ($0.04 psf). Asking rates decreased by $0.05 psf in the Downtown submarket, and by $0.01 psf
At current rates of net absorption, it would take the retail market 5.5 years to get back to 4.0 percent vacancy, where it averaged in the years before the real estate boom and the Great Recession that followed.
Retail vacancy in Southern Nevada was 8.6 percent in the third quarter of 2016, a decrease of 0.6 points from the second quarter of 2016 and a decrease of 1.0 point compared to the third quarter of 2015’s vacancy rate of 9.6 percent. Southern Nevada’s retail market has been expanding since 2012, though it experienced slower growth in 2014. This gives us two periods of strong growth, from 2012-2013, and in 2015 and 2016. Current growth in taxable retail sales and retail jobs suggest that the expansion will continue through 2017.
Among submarkets, the Valley’s highest vacancy this quarter was 12.3 percent in University East, while the lowest, 6.7 percent, was in the
21 Las Vegas Research & Forecast Report | Q3 2016 | Retail | Colliers International
“While taxable sales continue to be strong, we believe the retail market will continue to improve, and expect positive net absorptin to round out the year.”- John Stater, Research & GIS Manager | Las Vegas
Households(2015)
Ave. HH Income(2015)
Occupied Retail Space (2015 Average)
Occupied Retail Space(2016 Projected)
Downtown 36,500 $37,500 1,940,000 1,949,000
Henderson 107,100 $78,000 9,237,000 9,779,000
North Las Vegas 71,600 $62,000 5,552,000 5,993,000
Northeast 78,600 $50,400 3,099,000 3,237,000
Northwest 149,400 $74,200 12,557,000 13,199,000
Southwest 91,100 $75,900 7,644,000 8,421,000
University East 104,200 $54,200 7,597,000 7,905,000
West Central 54,600 $49,000 6,208,000 6,298,000
Source of Demographic Data: Claritas
in University East submarket, while remaining stable in the Northwest submarket. Since the second quarter of 2016, neighborhood centers saw their average asking rental rate increase by $0.04 psf, power centers by $0.02 psf and community centers and strip centers by $0.01 psf.
Shopping center investment sales volume so far in 2016 was $320.3 million in 28 sales totaling 1.8 million square feet. This equals an average price per square foot of $176.79, lower than in 2015, but an improvement over 2014. Southern Nevada is on pace to have an investment year on par with 2013. The average cap rate so far in 2016 is 7.0 percent, a substantial compression from the last two years. This puts 2016 about on par with 2014, but a bit off 2015, which was the best year since the Great Recession for single-tenant investment sales.
Single-tenant retail investment sales volume so far in 2016 was $134.4 million in 50 sales totaling 479,000 square feet. This equals an average price per square foot of $280.54, lower than in 2014 and 2015. The average cap rate so far in 2016 is 7.3 percent, a slight improvement over 2015, putting 2016 on track to match 2014’s single-tenant investment performance.
Retailers slated to enter Southern Nevada or expanding in the Valley include Chick-Fil-A, which began work on its first two locations in Southern Nevada, Paul Mitchell, Discount Tire, Lolo’s Chicken & Waffles, PDQ Chicken, Café Rio, Five Guys Burger & Fries, Black Bear Diner, Wingnutz, Pei Wei, and Cheeseburger Cheeseburger. Target is introducing a new Target Express concept to compete with Dollar General or Walgreens, though no locations have yet been announced in Southern Nevada. Walmart is planning locations at Durango & Hualapai and Boulder & Russell, and Smith’s Marketplace, a 125,000 square foot concept, is looking at putting stores in the Cadence MPC and Skye Canyon.
After a good start to the year, with 285,597 square feet of net absorption in the first quarter of 2016, net absorption went negative in the second quarter – though notably not so negative that it reversed the gains made in the first quarter of 2016. Whether the second quarter was a fluke or a breather, the market got back on track in the third quarter, posting very strong net absorption numbers. While taxable sales continue to be strong, we believe the retail market will continue to improve, and expect positive net absorptin to round out the year.
22 Las Vegas Research & Forecast Report | Q3 2016 | Retail | Colliers International
NORTHWEST
NORTHEASTLAS VEGAS
NORTHLAS VEGAS
SOUTHWEST
WESTCENTRAL
RESORTCORRIDOR
UNIVERSITYAIRPORT
HENDERSON
DOWNTOWN
15
215
215
95
95
Significant Retail Sale Activity
Gateway Plaza
55,000 SF - $9,400,000
$171.00/SF
July 2016
Multi-Tenant
Rainbow Expressway42,000 SF - $6,300,000
$150.00/SF
July 2016
Multi-Tenant
Aliante Marketplace61,000 SF - $19,000,000
$313.00/SF
August 2016
Multi-Tenant
Pecos Legacy Center76,000 SF - $13,000,000
$172.00/SF
August 2016
Multi-Tenant
Tucson Plaza32,000 SF - $5,250,000
$164.00/SF
July 2016 2016
Multi-Tenant
Lease Activity
Property Name Tenant Lease Date Lease Term Size Lease Rate Type
Grand Flamingo Parkway Water Wings Jul 2016 120 months 9,000 SF $1.49 NNN Community
Annie Oakley Retail Center State Medical Equipment Co Aug 2016 60 months 4,600 SF $0.68 NNN Strip Retail
Aliante Marketplace AAA Jul 2016 120 months 4,100 SF $2.22 NNN Neighborhood
Longford Shops at Summerlin Cinnamons Las Vegas Aug 2016 65 months 3,700 SF $1.92 NNN Strip Retail
Green Valley Town & Country Sin City Smokeless Aug 2016 60 months 2,400 SF $1.21 NNN Neighborhood
23 Las Vegas Research & Forecast Report | Q3 2016 | Retail | Colliers International
Market Comparisons - Las Vegas
Retail Market
TYPETOTAL
INVENTORYSF
DIRECTVACANT SF
DIRECTVACANCY
RATE
SUBLEASE VACANT SF
TOTALVACANT
SF
VACANCYRATE
CURRENT QUARTER
VACANCY RATEPRIOR
QUARTER
NET ABSORPTION
CURRENT QTR SF
NET ABSORPTION
YTDSF
COMPLETIONSCURRENTQTR SF
COMPLETIONS YTD SF
UNDER CONSTRUCTION
SF
PLANNED CONSTRUCTION
SF
WEIGHTEDAVG ASKING
RENTALRATE
DOWNTOWN
PC - - n/a - - n/a n/a - - - - - - $- CC 607,055 99,672 16.4% - 99,672 16.4% 13.1% (20,297) (42,461) - - - - $1.28 NC 518,070 55,647 10.7% - 55,647 10.7% 10.7% - (1,440) - - - - $1.01 SC 1,022,022 54,338 5.3% - 54,338 5.3% 5.8% 4,566 17,512 - - - 40,500 $1.41 Total 2,147,147 209,657 9.8% - 209,657 9.8% 9.0% (15,731) (26,389) - - - 40,500 $1.20
HENDERSON
PC 2,896,215 178,818 6.2% - 178,818 6.2% 6.8% 18,680 79,106 - - - - $1.77 CC 2,646,472 146,439 5.5% - 146,439 5.5% 6.2% 18,257 183 - - - - $1.57 NC 2,930,045 286,244 9.8% 189,143 475,387 16.2% 18.2% 59,225 20,390 - - - 618,422 $1.63 SC 1,886,098 242,897 12.9% 2,500 245,397 13.0% 12.6% (6,920) 758 - - - 166,745 $1.04 Total 10,358,830 854,398 8.2% 189,143 1,043,541 10.1% 10.9% 89,242 100,437 - - - 785,167 $1.48
NORTH LAS VEGAS
PC 774,065 31,986 4.1% - 31,986 4.1% 4.1% (415) 6,175 - - - - $2.25 CC 2,311,384 160,164 6.9% 1,505 161,669 7.0% 7.8% 19,714 25,828 - - - - $1.41 NC 1,806,524 150,281 8.3% 2,687 152,968 8.5% 7.5% (13,902) (25,769) - - - - $1.37 SC 1,285,256 200,724 15.6% - 200,724 15.6% 17.6% 25,951 67,658 - - - - $1.20 Total 6,177,229 543,155 8.8% 4,192 547,347 8.9% 9.3% 31,348 73,892 - - - - $1.37
NORTHEAST
PC - - n/a - - n/a n/a - - - - - - $- CC 1,295,615 65,060 5.0% 18,614 83,674 6.5% 6.6% 1,600 14,642 - - - - $1.47 NC 1,307,891 84,465 6.5% 62,301 146,766 11.2% 10.6% (7,558) 17,685 - - - - $1.55 SC 770,933 106,427 13.8% - 106,427 13.8% 11.9% (14,512) (62,609) - - - - $0.89 Total 3,374,439 255,952 7.6% 80,915 336,867 10.0% 9.4% (20,470) (30,282) - - - - $1.26
NORTHWEST
PC 3,171,110 255,390 n/a 1,400 256,790 8.1% 7.0% (33,677) (17,724) - - - - $1.53 CC 4,401,146 126,653 2.9% 73,059 199,712 4.5% 4.8% 62,812 122,829 52,000 52,000 - - $1.40 NC 3,639,506 329,645 9.1% 43,540 373,185 10.3% 11.5% 58,369 25,631 - - - 72,550 $1.43 SC 2,503,294 270,902 10.8% - 270,902 10.8% 11.2% 9,303 (18,441) - - - 31,000 $1.32 Total 13,715,056 982,590 7.2% 117,999 1,100,589 8.0% 8.3% 96,807 112,295 52,000 52,000 - 103,550 $1.42
SOUTHWEST
PC 944,314 46,096 4.9% - 46,096 4.9% 4.5% (3,500) (46,096) - - - - $1.54 CC 2,616,421 110,386 4.2% - 110,386 4.2% 8.0% 99,871 118,668 - - - 296,000 $1.75 NC 2,303,100 154,565 6.7% 2,692 157,257 6.8% 7.5% 15,680 86,602 - 80,000 - - $1.85 SC 2,363,217 240,216 10.2% 2,076 242,292 10.3% 10.1% 15,976 57,093 19,069 19,069 - 105,224 $1.54 Total 8,227,052 551,263 6.7% 2,692 553,955 6.7% 8.1% 128,027 216,267 19,069 99,069 - 401,224 $1.67
UNIVERSITY EAST
PC 1,210,223 120,230 9.9% - 120,230 9.9% 12.4% 29,296 25,243 - - - - $1.25 CC 2,946,724 302,292 10.3% 20,855 323,147 11.0% 12.4% 42,279 125,468 - - - - $0.85 NC 1,953,965 129,925 6.6% 163,160 293,085 15.0% 12.6% 496 22,190 - - - 129,588 $1.24 SC 2,936,321 562,680 19.2% 8,200 570,880 19.4% 19.1% (6,760) (77,815) - - - 104,487 $1.09 Total 9,047,233 1,115,127 12.3% 184,015 1,299,142 14.4% 14.6% 65,311 95,086 - - - 234,075 $1.06
WEST CENTRAL
PC 1,138,224 131,653 11.6% - 131,653 11.6% 12.5% 10,218 13,483 - - - - $1.23 CC 1,910,276 247,107 12.9% - 247,107 12.9% 12.0% (17,128) 34,635 - - - - $1.16 NC 1,756,947 116,279 6.6% 47,716 163,995 9.3% 12.1% 201 (22,267) - - - - $1.30 SC 2,170,564 160,358 7.4% - 160,358 7.4% 9.3% 40,941 87,839 - - - - $1.11 Total 6,976,011 655,397 9.4% 47,716 703,113 10.1% 11.3% 34,232 113,690 - - - - $1.19
MARKET TOTAL
PC 10,134,151 764,173 7.5% 1,400 765,573 7.6% 7.7% 20,602 60,187 - - - - $1.52 CC 18,735,093 1,257,773 6.7% 114,033 1,371,806 7.3% 8.2% 207,108 399,792 52,000 52,000 - 296,000 $1.27 NC 16,216,048 1,307,051 8.1% 511,239 1,818,290 11.2% 11.8% 112,511 123,022 - 80,000 - 820,560 $1.48 SC 14,937,705 1,838,542 12.3% 12,776 1,851,318 12.4% 12.7% 68,545 71,995 19,069 19,069 - 447,956 $1.18 Total 60,022,997 5,167,539 8.6% 639,448 5,806,987 9.7% 10.2% 408,766 654,996 71,069 151,069 - 1,564,516 $1.33
QUARTERLY COMPARISON AND TOTALS
Q3-16 60,022,997 5,167,539 8.6% 639,448 5,806,987 9.7% 10.2% 408,766 654,996 71,069 151,069 - 1,564,516 $1.26 Q2-16 59,951,928 5,505,236 9.2% 618,699 6,123,935 10.2% 10.2% (37,367) 246,230 0 80,000 71,069 1,492,349 $1.31 Q1-16 59,951,928 5,467,869 9.1% 653,842 6,121,711 10.2% 10.5% 283,597 283,597 80,000 80,000 242,402 466,083 $1.30 Q4-15 59,871,928 5,671,466 9.5% 629,228 6,300,694 10.5% 10.5% 87,160 573,512 29,800 152,429 270,402 710,023 $1.31 Q3-15 59,842,128 5,728,826 9.6% 579,499 6,308,325 10.5% 10.9% 138,267 486,352 55,000 122,629 209,588 452,095 $1.27 Q2-15 59,787,128 5,812,093 9.7% 675,838 6,487,931 10.9% 10.9% 166,145 348,085 67,629 67,629 184,588 224,550 $1.28 Q1-15 59,719,499 5,910,609 9.9% 623,327 6,533,936 10.9% 10.7% 181,940 181,940 0 0 122,629 468,883 $1.26 PC = Power Center CC = Community Center NC = Neighborhood Center SC = Strip Center
24 Las Vegas Research & Forecast Report | Q3 2016 | Retail | Colliers International
Historical Vacancy Rates and Rental Rates
Market Indicators Relative to prior period Q1 2016 Q2 2016*
VACANCY
NET ABSORPTION
COMPLETIONS
RENTAL RATE *Projected
“… newly completed units have not resulted in an increase in vacancy.”
Summary Statistics Q3 2016 Las Vegas Market Q2-15 Q1-16 Q2-16
Vacancy Rate 4.7% 4.2% 4.2%
Asking Rent (PSF, NNN) $906 $918 $927
Net Absorption (SF) 1,389 868 1,469
New Completions (SF) 1,110 473 473
Overall Asking Rents Per Unit Per Month Previous Quarter Current Quarter
Class A $1,045 $1,054
Class B/C $797 $806
Demand Meets Supply
Research & Forecast Report
LAS VEGAS | MULTIFAMILYQ3 2016
> Multifamily vacancy remained steady at 4.2 percent in the third quarter
> There were no new completion this quarter, though several developments should be delivered by the end of the year
> Asking rates continued to increase
According to statistics provided by REIS, multifamily vacancy in Southern Nevada remained stable in the second quarter of 2016 (the most recent quarter of available data) this quarter at 4.2 percent. Vacancy is now 0.5 percentage points lower than in the second quarter of 2015. Class A properties were 5.3 percent vacant in the first quarter, 0.3 percentage points higher than last quarter, likely driven by the delivery of new multifamily properties over the past year. Class B/C properties were 3.1 percent vacant, 0.3 percentage points lower than last quarter.
+1.8%
NEW HOMEMedian Price
ELECTRICMeter Hookups
THIRTY YEARMortgage Rate
-0.6
Points+5.1%
Economic Indicators
$820
$840
$860
$880
$900
$920
$940
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2 Q 2014 3 Q 2014 4 Q 2014 1 Q 2015 2 Q 2015 3 Q 2015 4 Q 2015 1 Q 2016 2 Q 2016
Vacancy vs Rents
Vacancy Rate Average Rental Rate
Historical Net Absorption vs.Completions
Sales (Units) vs.Price Per Unit
Complex Under Construction Submarket Units
Elysian at Hacienda Northwest/Southwest 466
EVO Apartments Northwest/Southwest 376
The Gallery Northwest/Southwest 348
Spencer/St Rose Apartments Henderson 348
Fremont9 Downtown 231
South Beach Apartments Northwest/Southwest 220
The Mercer Northwest/Southwest 177
The Constellation Northwest/Southwest 124
Vue at Centennial Northwest/Southwest 111
Prestige Apartments Northwest/Southwest 69
TOTAL 2,470
All multifamily submarkets had positive net absorption in the second quarter of 2016, with both the Northwest/Southwest and West Central submarkets being particularly strong. The Northwest/Southwest submarket has experienced significant development of new multifamily over the past year and is set to experience more in the coming quarters, making that high demand welcome news to developers. Strong demand for Class A space in the West Central submarket is more surprising. Demand was weakest in Northeast submarket.
No new multifamily projects were completed in the second quarter of 2016. Last quarter, newly completed multifamily properties totaled 473 units. Another 2,470 units were under construction, and developers have 390 units planned to begin construction within the next twelve months. This means that the current wave of development will probably end by early 2018 unless additional developments are proposed in the meantime.
The average asking rent for multifamily was $927 per unit in the second quarter of 2016, increasing by $21 psf year-over-year, and by $9 per unit since last quarter. Class A properties saw asking rates increase by 3.0 percent year-over-year, to $1,045 per unit, while Class B/C properties saw a 4.0 percent increase to $806 per unit. Rent growth while construction levels are high suggests that new properties are not only doing well, but are finding new tenants rather than just cannibalizing existing properties.
Unemployment in the Las Vegas-Paradise MSA stood at 6.7 percent as of July 2016, down from 7.1 percent in July 2015. From July 2015 to July 2016, total employment in Southern Nevada has increased by 27,000 jobs. Unemployment has averaged 6.3 percent in 2016, compared to 6.8 percent in 2015. Unemployment in the Las Vegas-Paradise MSA was increasing in May and June of 2016 until turning around and falling by 0.2 percentage points in July. Since July 2015, total employment in Southern Nevada increased by 27,000 jobs, the majority of those new jobs being in education and healthcare (+7,500 jobs), construction (+6,800 jobs), retail (+4,000 jobs) and leisure and hospitality (+3,800 jobs). The “other services” sector lost 300 jobs over the past twelve months.
0
100
200
300
400
500
600
700
800
900
1,000
2 Q 2014 3 Q 2014 4 Q 2014 1 Q 2015 2 Q 2015 3 Q 2015 4 Q 2015 1 Q 2016 2 Q 2016
Net Absorption vs. Completions
Net Absorption (Units) Completions (Units)
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
4 Q
201
0 1
Q 2
011
2 Q
201
1 3
Q 2
011
4 Q
201
1 1
Q 2
012
2 Q
201
2 3
Q 2
012
4 Q
201
2 1
Q 2
013
2 Q
201
3 3
Q 2
013
4 Q
201
3 1
Q 2
014
2 Q
201
4 3
Q 2
014
4 Q
201
4 1
Q 2
015
2 Q
201
5 3
Q 2
015
4 Q
201
5 1
Q 2
016
2 Q
201
6
Sales (Units) vs. Price Per Unit
Total Sales (Units) Average Price Per Unit
26 Las Vegas Research & Forecast Report | Q3 2016 | Multifamily | Colliers International
Sales Data2012 2013 2014 2015 2016 YTD
Units Sold 21,840 17,808 14,019 15,408 12,534
Average Price Per Unit $65,425 $75,600 $73,627 $71,836 $110,111
Cap Rate 7.3% 5.7% 6.0% 7.3% 5.5%
Demographics Submarket
EstimatedHouseholds (2016)
RenterOccupied (2016)
MedianHousehold (2016)
AverageHousehold (2016)
Proj. Annual Growth Rental Households (2016-2021)
Downtown 49,000 65% $31,000 2.8 170
East 80,000 44% $42,000 2.7 337
Henderson/Southeast 153,000 37% $62,000 2.6 793
North Las Vegas 131,000 36% $55,000 3.1 698
Northeast 49,000 49% $39,000 3.3 238
Northwest/Southwest 174,000 35% $64,000 2.6 977
University 36,000 77% $33,000 2.2 176
West Central 70,000 52% $47,000 2.4 413
TOTAL 743,000 43% $51,000 2.7 3,802
Source: Claritas
According to data provided by the Nevada Department of Motor Vehicles, the number of out-of-state driver’s licenses turned in to the DMV since July 2015 was 66,221. This is higher than during the same period from 2014 to 2015 when they reported 61,508 out-of-state licenses turned in, and suggests that population growth in Southern Nevada is accelerating. Population growth has been a major driver of Southern Nevada’s economic growth since Las Vegas’s birth in 1905, so improvements in population growth are particularly important for the region and the multifamily market in particular.
Multifamily sales increased in the second quarter of 2016 compared to the second quarter of 2015, with 5,786 units selling at an average sales price per unit of $118,841. Initial estimates for third quarter 2016 sales are approximately 3,400 units selling at an average price per unit of $98,000. The average price of sales in 2016 is significantly higher than over the past five years. Multifamily investments are hot all over
the United States, so it should be no surprise that they are hot in one of the country’s faster growing cities. The pace of development and the newer, better located properties that are being sold are key factors in the increase in average price per unit this year.
The current wave of multifamily development in Southern Nevada began in the fourth quarter of 2015, and to date has totaled 2,437 units. A nearly equal number of units are now under construction and should be completed over the next few quarters, representing a distinct acceleration in new development. So far, these newly completed units have not resulted in an increase in vacancy. In fact, vacancy has decreased by 1.2 points over that period, indicating that these units are not taking tenants away from existing properties. Whether demand will keep up with new supply over the next few quarters is unknown, but we do not think these new properties will negatively impact the market.
27 Las Vegas Research & Forecast Report | Q3 2016 | Multifamily | Colliers International
EAST
NORTHEAST
NORTHWEST/SOUTHWEST
HENDERSON/GREEN VALLEY
WEST CENTRAL
NORTH LAS VEGAS
UNIVERSITY
DOWNTOWN
WEST
15
215
215
95
95
Significant Multifamily Sales Activity
The Wyatt308 Units - $57.3 MM
$185,900/Unit
September 2016
Year Built - 2015
Oasis Gateway360 Units - $39.2 MM
$108,900/Unit
September 2016
Year Built - 1997
The Arbors216 Units - $24.4 MM
$99,100/Unit
August 2016
Year Built - 1988
Oasis Vinings234 Units - $23.0 MM
$98,300/Unit
September 2016
Year Built - 1994
Reflections at the Lakes326 Units - $37.5 MM
$115,000/Unit
September 2016
Year Built - 1989
Sales Activity Continued
Property Name Sale Date Units Price Price/Unit Year Built
Meadow Ridge Aug 2016 232 $22.6 MM $97,400 1990
Oasis Palms Sep 2016 208 $21.3 MM $102,400 1989
LaVentaria Aug 2016 256 $19.5 MM $76,200 1989
Majestic Heights Aug 2016 240 $18.6 MM $77,500 1990
Trellis Park Cheyenne Aug 2016 161 $18.1 MM $112,400 2009
Source: Real Capital Analytics
28 Las Vegas Research & Forecast Report | Q3 2016 | Multifamily | Colliers International
Market Comparisons - Las Vegas
Multifamily Market
CLASSTOTAL
INVENTORY UNITS
CURRENT VACANCY RATE
PRIOR QTR VACANCY RATE
NET ABSORPTION
NET ABSORPTION YTD UNITS
CURRENT QTR COMPLETIONS
YTD UNIT COMPLETIONS
UNDER CONSTRUCTION
UNITS
PLANNED CONSTRUCTION
UNITS
TOTAL SALES UNITS
AVERAGE PRICE PER UNIT
AVERAGE RENTAL RATE
DOWNTOWN
A 2,773 0.7% 0.8% 3 30 - - 231 - - n/a $889B/C 13,454 0.9% 1.3% 46 132 - - - - 1,838 $75,483 $756Total 16,227 0.9% 1.2% 49 162 - - 231 - 1,838 $75,483 $779
EAST LAS VEGAS
A 6,383 3.4% 3.6% 15 43 - - - - - n/a $907B/C 8,939 1.7% 2.0% 30 141 - - - - 652 $127,607 $775Total 15,322 2.4% 2.7% 45 184 - - - - 652 $127,607 $830
HENDERSON/GREEN VALLEY
A 19,883 7.3% 7.0% 106 221 - 383 348 - 320 $204,219 $1,154B/C 8,068 7.8% 7.7% (8) 16 - - - - 1,057 $120,861 $993Total 27,951 7.4% 7.2% 98 237 - 383 348 - 1,377 $140,232 $1,107
NORTH LAS VEGAS
A 12,918 4.8% 5.0% 19 47 - - - - - n/a $941B/C 9,552 4.6% 5.0% 33 73 - - - - - n/a $757Total 22,470 4.8% 5.0% 52 120 - - - - - n/a $864
NORTHEAST
A 2,172 2.7% 2.8% 1 18 - - - - - n/a $832B/C 6,643 3.9% 4.3% 25 117 - - - - 160 $62,500 $750Total 8,815 3.6% 3.9% 26 135 - - - - 160 $62,500 $769
NORTHWEST/SOUTHWEST
A 16,657 5.5% 5.6% 16 26 - 90 1,891 390 - n/a $1,175B/C 5,452 2.2% 2.3% 119 245 - - - - 1,691 $153,193 $1,066Total 22,109 4.7% 4.8% 135 271 - 90 1,891 390 1,691 $153,193 $1,148
UNIVERSITY
A 2,180 2.2% 1.9% (9) (7) - - - - - n/a $984B/C 12,321 3.6% 4.3% 82 153 - - - - - n/a $727Total 14,501 3.4% 3.9% 73 146 - - - - - n/a $766
WEST CENTRAL
A 5,671 5.1% 2.1% 138 178 - - - - - n/a $972B/C 6,860 0.5% 0.3% (12) 36 - - - - - n/a $778Total 12,531 2.6% 1.1% 126 214 - - - - - n/a $868
MARKET TOTAL
A 68,637 5.3% 5.0% 289 556 - 473 2,470 390 320 n/a $1,054B/C 71,289 3.1% 3.4% 315 913 - - n/a n/a 5,398 $114,623 $806Total 139,926 4.2% 4.2% 604 1,469 - 473 2,470 390 5,718 $119,638 $927
QUARTERLY COMPARISON AND TOTALS
Q2-16 139,926 4.2% 4.2% 604 1,472 - 473 2,470 390 5,718 $119,638 $927Q1-16 139,926 4.2% 4.8% 868 868 473 473 2,239 621 3,324 $107,787 $918Q4-15 139,453 4.8% 4.7% 264 1,788 360 1,794 1,826 1,345 5,411 $66,933 $911Q3-15 139,093 4.7% 4.7% 135 1,524 324 1,434 1,216 1,704 3,887 $73,685 $910Q2-15 139,926 4.7% 5.0% 647 1,389 840 1,110 1,617 2,222 2,626 $77,603 $906Q1-15 139,086 5.0% 5.4% 742 742 270 270 1,617 2,222 3,572 $82,458 $889Q4-14 138,816 5.4% 5.2% 370 1,549 170 511 1,617 2,222 3,572 $82,458 $878
* Most recent quarter of dataSource: REISSales Data provided by Colliers International
29 Las Vegas Research & Forecast Report | Q3 2016 | Multifamily | Colliers International
+6.5%
HEALTHCARESpending
HEALTHCAREEmployment
+22
MEDICALSF/Job
-6.8%
Q32016
Economic Indicators
Historical Vacancy Rates and Rental Rates
“The third quarter of 2016 offered a pleasant change of course for the medical office market …”
Market Indicators Relative to prior period Q3 2016 Q4 2016*
VACANCY
NET ABSORPTION
COMPLETIONS
RENTAL RATE
*Projected
Summary Statistics Q3 2016 Las Vegas Market Q3-2015 Q2-2016 Q3-2016
Vacancy Rate 16.3% 17.7% 17.0%
Asking Rent (PSF, NNN) $2.18 $2.14 $2.16
Net Absorption (SF) -6,806 -55,020 54,493
New Completions (SF) 0 0 0
Overall Asking Rents Per Square Foot
Class A $2.59 $2.58 $2.55
Class B $2.25 $2.21 $2.22
Class C $1.78 $1.78 $1.82
Medical Office Strikes Back
Research & Forecast Report
LAS VEGAS | MEDICAL OFFICEQ3 2016
> Southern Nevada’s medical office market registered its first positive net absorption in five quarters
> Vacancy dropped to 17 percent
> Asking rates also turned around, posting a moderate increase
After four quarters of mounting negative net absorption, Southern Nevada’s medical office market made an abrupt turn into positive territory. Net absorption rebounded in the third quarter of 2016, reaching 54,493 square feet. This brought vacancy down to 17 percent, a 0.7 point drop from one quarter ago, but still 0.7 points higher than one year ago. The weighted average asking rental rate increased to $2.16 per square foot (psf) on a full service gross (FSG) basis, a $0.02 increase over last quarter.
$2.12
$2.13
$2.14
$2.15
$2.16
$2.17
$2.18
$2.19
12.0%
13.0%
14.0%
15.0%
16.0%
17.0%
18.0%
19.0%
3 Q 2014
4 Q 2014
1 Q 2015
2 Q 2015
3 Q 2015
4 Q 2015
1 Q 2016
2 Q 2016
3 Q 2016
Vacancy Rate Rental Rate
Historical Net Absorption vs.Completions
Healthcare Jobs vs.Occupancy Rate
-120,000
-100,000
-80,000
-60,000
-40,000
-20,000
0
20,000
40,000
60,000
80,000
100,000
3 Q 2014
4 Q 2014
1 Q 2015
2 Q 2015
3 Q 2015
4 Q 2015
1 Q 2016
2 Q 2016
3 Q 2016
Net Absorption Completions
13,000
13,500
14,000
14,500
15,000
15,500
16,000
16,500
17,000
80.0%
80.5%
81.0%
81.5%
82.0%
82.5%
83.0%
83.5%
84.0%
3 Q 2014
4 Q 2014
1 Q 2015
2 Q 2015
3 Q 2015
4 Q 2015
1 Q 2016
2 Q 2016
3 Q 2016
Healthcare Jobs Occupancy Rate
According to the Nevada Department of Employment, Training and Rehabilitation, Southern Nevada’s medical office job market improved in July 2016 (the latest month of data available) compared with July 2015, adding approximately 4,500 jobs in the past twelve months. This does not include jobs at hospitals. Employment that directly impacted medical office projects increased by approximately 1,100 jobs. The medical sector has seen strong job growth for many quarters without that growth impacting demand for medical office space. This quarter, the medical office might have finally caught up with that job growth. Unemployment in the Las Vegas-Paradise MSA stood at 6.7 percent as of July 2016, down from 7.1 percent in July 2015. From July 2015 to July 2016, total employment in Southern Nevada has increased by 27,000 jobs.
According to the Nevada Department of Taxation, taxable spending on ambulatory health care services in Clark County in the second quarter of 2016 (the most recent quarter of data) totaled $21.1 million dollars. This represented a 22 percent year-over-year increase in spending. Spending on ambulatory health care appeared to be levelling off in late 2015 and early 2016 until the second quarter’s jump. On the downside, it is unclear how much of this increase in taxable spending is due to more healthcare being purchased versus how much that healthcare costs.
The last time medical office space was completed in Southern Nevada was during the second quarter of 2015, when 16,000 square feet was added to inventory. When the new Henderson Hospital at Union Village is completed, which should be very soon, development of 150,000 square feet of medical office and 190,000 square feet of retail space will follow, though this could still be 12-18 months away. A 211,000 square foot Class A medical office building is now under construction at Cimarron Road and Tenaya Way, and should be completed in 2017. Several new small hospitals for urgent or emergency care are planned in the valley, including the 100,000 square foot Southern Hills Emergency Hospital at Desert Inn & Fort Apache, and four small hospitals being developed by Dignity Health at Craig & Camino Al Norte, Blue Diamond & Decatur, Flamingo & I-215 and Decatur & Sahara.
Vacancy in medical office space decreased in the third quarter of 2016 to 17 percent, a decrease of 0.7 points from the second quarter of 2016, but an increase of 0.7 points from one year ago. This quarter’s decrease in vacancy was the first such decrease in four quarters, despite growth in health care-related jobs and spending, and hopefully signals a return to a more normal pattern of growth.
The highest vacancy rates in the third quarter of 2016 were in the Southwest (32.7 percent), North Las Vegas (20.9 percent) and Airport (20.2 percent) submarkets. The lowest vacancy rate is now in Downtown (10.4 percent), followed by East Las Vegas and Henderson at 14.7 percent. Vacancy decreased in Downtown, East Las Vegas and the Southwest, with the largest decrease occurring in the Downtown submarket. Vacancy increased in Henderson, West Central and Northwest, and remained stable in Airport and North Las Vegas.
31 Las Vegas Research & Forecast Report | Q3 2016 | Medical Office | Colliers International
“After four quarters of mounting negative net absorption, Southern Nevada’s medical office market made an abrupt turn into positive territory.”
- John Stater, Research & GIS Manager
Southern Nevada’s medical office market saw some positive growth in early 2015, but this growth turned negative during the four quarters between the third quarter of 2015 and the second quarter of 2016. This means that this quarter’s positive net absorption is the first growth the market has seen in a year. The 2015/2016 1.4-point increase in vacancy occurred at the same time the Valley added over 1,000 ambulatory healthcare jobs and ambulatory healthcare spending increased by 4.7 percent.
The disconnect between job and spending growth and demand for medical office space can be tied to changes in which healthcare is being delivered, and these changes will continue to plague the market for years to come. In the first place, consolidation within the medical profession, coupled with more efficient space use, is decreasing the amount of space occupied by medical office users. Even when medical users are growing their practices, they may not be growing the size of their office. On top of that, medical practitioners have found it possible to use non-medical office space, such as in professional office buildings and retail centers, for their practices. Both of these factors have hurt demand for medical office space for the past decade. Since 2006, Southern Nevada’s medical office market has lost 151,000 square feet of occupancy, while at the same time adding 10,600 ambulatory health care jobs.
The weighted average asking rental rate for medical office space in the third quarter of 2016 was $2.16 per square foot (psf) on a full service gross (FSG) basis. Asking rents in the third quarter of 2016 were $0.02 psf higher than one quarter ago and $0.02 lower than one year ago. The decrease in asking rents experienced last quarter was not surprising, given the weak demand for medical office over the past year. The increase that occurred this quarter may be as much due to less expensive space leaving the market as it was due to actual asking rent increases.
The lowest average asking rate for medical office space was in the West Central submarket, at $1.78 psf, followed by North Las Vegas at $1.80 psf. The Valley’s highest asking rate was in Northwest, at $2.41 psf, followed by Henderson at $2.34 psf. Lease rates increased this quarter in Downtown, East Las Vegas and West Central, and decreased in Henderson, North Las Vegas, Northwest and Southwest. It is worth noting that decreases in vacancy in Downtown and East Las Vegas were accompanied by increases in the weighted average asking rates in those submarkets; this suggests that the occupancy of less expensive space was indeed a factor in the increase of the Valley’s average asking rate in the third quarter.
Investment sales volume of medical office so far in 2016 amounted to $9.9 million in three sales totaling 90,000 square feet, with an average sales price of $110.12 per square foot. These buildings had an average cap rate of 6.8 percent. For comparison’s sake, investment sales volume in 2015 was almost $80 million.
Owner/user sales volume of medical office space so far in 2016 was $6.1 million in five sales totaling 23,893 square feet. The average sales price was $255.70. For comparison’s sake, owner/user sales volume in 2015 was $40.9 million in twelve sales totaling 120,543 square feet, with an average sales price of $339.03.
The third quarter of 2016 offered a pleasant change of course for the medical office market, replacing four quarters of negative net absorption with positive net absorption. While the four quarter slide was certainly not good for the market, it was fortunately not quite enough to erase the two strong growth quarters that occurred in early 2015, which means that the medical office market is in better shape now than it was two years ago. In medical office’s favor is the continued growth in healthcare employment and maybe the growth in healthcare spending in Southern Nevada. Even if not all of that growth is filtering into medical office buildings, this should help improve demand for medical office space in the long run.
32 Las Vegas Research & Forecast Report | Q3 2016 | Medical Office | Colliers International
NORTHWEST
EASTLAS VEGAS
NORTHLAS VEGAS
SOUTHWEST
WESTCENTRAL
AIRPORT
HENDERSON
DOWNTOWNSUMMERLIN
15
215
215
95
95
Significant Medical Office Sales Activity
Windmill Medical Office Building9,000 SF - $1,400,000
$161.98/SF
March 2016
Class C
Coronado Medical Center3,000 SF - $600,000
$186.40/SF
May 2016
Class C
Huffman Hualapai Pavilion Com-mons5,500 SF - $2,500,000
$563.64/SF
July 2016
Class C
2650 North Tenaya Way68,000 SF - $2,900,000
$42.61/SF
April 2016
Class B
259 N Pecos Rd1,500 SF - $290,000
$187.10/SF
May 2016
Class C
Significant Lease Activity
Property Name Lease Date Lease Term Size Lease Rate Tenant
1330 Valley View Jul 2016 126 months 18,100 SF $1.69 NNN Physicians
Durango Medical Plaza Jul 2016 136 months 6,900 SF $1.86 NNN Fertility Center
Siena Pavilion Apr 2016 36 months 4,200 SF $1.29 NNN Physicians
Seven Hills Medical Center Feb 2016 60 months 2,400 SF $1.08 NNN Management
Sunrise Medical Towers Jul 2016 36 months 1,300 SF $2.06 MG Sleep Center
33 Las Vegas Research & Forecast Report | Q3 2016 | Medical Office | Colliers International
Market Comparisons - Las Vegas
Medical Office Market
TYPETOTAL
INVENTORYSF
DIRECTVACANT SF
DIRECTVACANCY
RATE
SUBLEASE VACANT SF
TOTALVACANT
SF
VACANCYRATE
CURRENT QUARTER
VACANCY RATEPRIOR
QUARTER
NET ABSORPTION
CURRENT QTR SF
NET ABSORPTION
YTDSF
COMPLETIONSCURRENTQTR SF
COMPLETIONS YTD SF
UNDER CONSTRUCTION
SF
PLANNED CONSTRUCTION
SF
WEIGHTEDAVG ASKING
RENTALRATE
AIRPORT SUBMARKET
A - - n/a - - n/a n/a - - - - - - $- B - - n/a - - n/a n/a - - - - - - $- C 38,000 7,690 20.2% - 7,690 20.2% 20.2% - 5,000 - - - - $1.92 Total 38,000 7,690 20.2% - 7,690 20.2% 20.2% - 5,000 - - - - $1.92
DOWNTOWN SUBMARKET
A 65,000 - 0.0% - - 0.0% 0.0% - - - - - - $- B 227,301 25,293 11.1% - 25,293 11.1% 34.6% 53,445 1,733 - - - - $2.28 C 86,997 13,976 16.1% - 13,976 16.1% 5.8% (8,958) (8,958) - - - - $1.60 Total 379,298 39,269 10.4% - 39,269 10.4% 22.1% 44,487 (7,225) - - - - $2.04
EAST LAS VEGAS SUBMARKET
A - - n/a - - n/a n/a - - - - - - $- B 669,264 143,466 21.4% - 143,466 21.4% 21.1% (2,173) 11,230 - - - - $2.01 C 629,240 47,638 7.6% - 47,638 7.6% 14.2% 41,553 49,681 - - - - $1.72 Total 1,298,504 191,104 14.7% - 191,104 14.7% 17.7% 39,380 60,911 - - - - $1.94
HENDERSON SUBMARKET
A 421,834 47,080 11.2% - 47,080 11.2% 11.1% -296 5,831 - - - 80,000 $2.92 B 320,925 110,100 34.3% 2,515 112,615 35.1% 25.0% -32,500 (53,090) - - - - $2.17 C 604,216 41,146 6.8% - 41,146 6.8% 7.9% 3,084 3,027 - - 27,000 - $2.14 Total 1,346,975 198,326 14.7% 2,515 200,841 14.9% 13.0% (29,712) (44,232) - - 27,000 80,000 $2.34
NORTH LAS VEGAS SUBMARKET
A - - n/a - - n/a n/a - - - - - - $- B 43,921 10,929 24.9% - 10,929 24.9% 24.9% - (5,129) - - - - $1.00 C 158,867 31,525 19.8% - 31,525 19.8% 19.8% - (9,625) - - - - $2.08 Total 202,788 42,454 20.9% - 42,454 20.9% 20.9% - (14,754) - - - - $1.80
NORTHWEST SUBMARKET
A 807,173 132,832 16.5% 12,346 145,178 18.0% 17.4% (4,992) 25,656 - - 80,251 - $2.51 B 1,031,717 159,055 15.4% - 159,055 15.4% 14.6% (8,642) (33,813) - - - - $2.38 C 202,434 10,353 5.1% - 10,353 5.1% 6.1% 2,050 - - - - - $1.50 Total 2,041,324 302,240 14.8% 12,346 314,586 15.4% 14.8% (11,584) (8,157) - - 80,251 - $2.41
SOUTHWEST SUBMARKET
A 115,300 41,614 36.1% - 41,614 36.1% 46.4% 11,887 6,130 - - - - $2.28 B 380,926 153,403 40.3% 4,440 157,843 41.4% 46.5% 19,245 30,874 - - - - $2.35 C 275,170 57,236 20.8% - 57,236 20.8% 20.0% (2,134) (2,512) - - - - $2.01 Total 771,396 252,253 32.7% 4,440 256,693 33.3% 37.0% 28,998 34,492 - - - - $2.26
WEST CENTRAL SUBMARKET
A - - n/a - - n/a n/a - - - - - - $- B 291,027 27,751 9.5% - 27,751 9.5% 9.1% (1,320) (6,461) - - - - $2.31 C 869,393 168,645 19.4% - 168,645 19.4% 17.6% (15,756) (41,921) - - - - $1.69 Total 1,160,420 196,396 16.9% - 196,396 16.9% 15.5% (17,076) (48,382) - - - - $1.78 MARKET TOTALA 1,409,307 221,526 15.7% 12,346 233,872 16.6% 17.1% 6,599 37,617 - - 80,251 80,000 $2.55 B 2,965,081 629,997 21.2% 6,955 636,952 21.5% 22.4% 28,055 (54,656) - - - - $2.22 C 2,864,317 378,209 13.2% - 378,209 13.2% 14.0% 19,839 (5,308) - - 27,000 - $1.82 Total 7,238,705 1,229,732 17.0% 19,301 1,249,033 17.3% 18.1% 54,493 (22,347) - - 107,251 80,000 $2.16
QUARTERLY COMPARISON AND TOTALS
Q3-16 7,238,705 1,229,732 17.0% 19,301 1,249,033 17.3% 18.1% 54,493 (22,347) - - 107,251 80,000 $2.16
Q2-16 7,238,705 1,284,225 17.7% 23,007 1,307,232 18.1% 17.1% (55,020) (76,840) - - 80,251 107,000 $2.14
Q1-16 7,238,705 1,229,205 17.0% 6,955 1,236,160 17.1% 16.8% (21,820) (21,820) - - - 291,931 $2.17 Q4-15 7,238,705 1,207,385 16.7% 8,955 1,216,340 16.8% 16.6% (25,501) 116,729 - 16,000 - 361,931 $2.19 Q3-15 7,238,705 1,181,884 16.3% 22,436 1,204,320 16.6% 16.5% (6,806) 142,230 - 16,000 - 361,931 $2.18 Q2-15 7,238,705 1,175,078 16.2% 20,245 1,195,323 16.5% 17.3% 73,923 149,036 16,000 16,000 - 131,680 $2.18 Q1-15 7,222,705 1,233,001 17.1% 15,002 1,248,003 17.3% 18.3% 75,113 75,113 - - - 131,680 $2.16
34 Las Vegas Research & Forecast Report | Q3 2016 | Medical Office | Colliers International
Summary StatisticsQ3 2016 Las Vegas Market Q3, 2015 Q2-2016 Q3-2016
Room Inventory 144,508 144,508 144,632
Room Occupancy 89.9% 90.4% 93.7%
Average Daily Rate $112.31 $124.87 $119.24
Revenue Per Available Room $101.00 $112.85 $111.73
Market IndicatorsRelative to prior period Now Future
Room Inventory
Room Occupancy
Average Daily Rate
Revenue Per Available Room
*Projected
+2.6%
CONVENTIONAttendance
AIRPassengers
+16.5
RevPAR
+15.5%
Jul2016
Revenue Per Available Room (RevPar)
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
2 Q 2014 3 Q 2014 4 Q 2014 1 Q 2015 2 Q 2015 3 Q 2015 4 Q 2015 1 Q 2016 2 Q 2016
RevPAR
Hospitality Heats Up while Sales Cool Down
Research & Forecast Report
LAS VEGAS | HOTELQ3 2016
> Visitor volume and gaming revenue are on track to hit new highs in 2016
> Room inventory growth is almost non-existent, and will remain so for the next two years
> Sales of hospitality properties have cooled over the last three quarters
Southern Nevada’s hospitality market is pushing its way past recovery and into expansion, at least in terms of visitor volume and gaming revenue, though notably not in terms of room inventory growth. Visitor volume in the first seven months of 2016 is an improvement over the first seven months of 2015, and room occupancy, average daily room rate (ADR) and revenue per available room (RevPAR) are also up year-over-year.
While gaming revenue continues to lag behind the peak levels reached in 2006 and 2007, it has shown improvement since the Great Recession. Gaming revenue in 2016 has averaged year-over-year growth of 1.3 percent for Clark County as a whole, and 0.8 percent growth on the Las Vegas “Strip”. In April, Downtown gaming revenue is now 2.9 percent higher in 2016 than at this point in 2015, and the Boulder Strip, which primarily plays host to local casino patrons, posted 1.8 percent gaming revenue growth. Earlier this year, gaming revenue was showing negative growth, so this turnaround is very welcome news.
Economic Indicators
Sales vs.Price Per Unit
Market HealthData Point 2012 2013 2014 2015 2016 YTD*
Visitor Volume (Millions) 39.7 39.9 41.6 42.3 25.5
Room Occupancy 84.4% 84.3% 86.8% 87.7% 89.8%
ADR $108.02 $110.64 $116.48 $119.94 $126.11
RevPAR $91.17 $93.27 $101.05 $105.21 $113.06
Convention Attendance (Millions) 4.93 5.11 5.17 5.71 3.87
Passengers McCarran Int’l (Millions) 41.7 41.8 42.9 45.3 27.4
Gaming Revenue (Clark County, Billions) $9.4 $10.0 $9.6 $9.6 $5.7
Gaming Revenue (“Strip”, Billions) $6.2 $6.5 $6.4 $7.5 $3.7
Data from Las Vegas Convention & Visitors Authority
* Data from January to July
SalesVolume
Room inventory remained essentially unchanged in the third quarter of 2016, and no additional closures are planned for 2016. The 201-room Lucky Dragon, under construction in the Resort Corridor, should be completed in the fourth quarter of 2016, and the 124-room Residence Inn that was under construction in South Las Vegas was completed this quarter. The much larger Resorts World Las Vegas property is currently under construction, with completion of the first phase planned for 2019, along with Steve Wynn’s 1,000-room Paradise Park project that will be constructed on the former site of the Desert Inn Golf Course.
Southern Nevada’s non-gaming construction boom has continued in 2016, with recent additions to Southern Nevada’s entertainment complex including Topgolf International’s four-story golf entertainment complex at the MGM Grand, a 415,085 square foot IKEA store along the I-215 Beltway, new retail fronting the Treasure Island, the Rock N Rio festival, and the 20,000 seat MGM Resorts International Arena behind New York-New York and Monte Carlo which will one day host Las Vegas’ NHL hockey franchise. Still to come are a $75 million renovation of Caesars Palace’s original Roman Tower, a new 5,000-seat theatre at the Monte Carlo and a $47 million renovation of the Thomas & Mack Center. The Las Vegas Convention Center is planning a major expansion of the convention center to keep Southern Nevada at the forefront of convention destinations in the United States. In all, we expect approximately $1.1 billion will have been spent on Southern Nevada’s hospitality market by the end of 2016, before another $10 billion is spent on hospitality development between 2017 and 2019.
Hospitality sales appeared to be cooling in 2016 compared to the past three years. A total of 1,463 rooms sold in Southern Nevada in the first three quarters of 2016. Sales volume in the first three quarters of 2016 was $476.2 million and the average sales price was $326,000 per room. Final sales volume in 2015 was $853.8 million in 14 sales totaling 7,558 units with an average sales price of $113,000 per room. 2015 saw as many rooms selling as 2014, but at a lower sales volume.
While Southern Nevada’s hospitality market continues to heat up, hospitality sales are cooling down. This probably has less to do with any deficiency in the properties in question than in a shift of attention by investors towards the multifamily market and an interest by current owners to remain in possession of their properties. As high as
36 Las Vegas Research & Forecast Report | Q3 2016 | Hotel | Colliers International
Hospitality Sales*
Year Volume Units Sold Price/Unit
2016 YTD $476 MM 1,463 $326,000
2015 $854 MM 7,558 $113,000
2014 $1,864 MM 7,749 $241,000
2013 $55 MM 1,129 $49,000
2012 $121 MM 2,613 $46,000
2011 $3,009 MM 7,369 $408,000
2010 $858 MM 8,883 $97,000
2009 $1,226 MM 4,913 $249,000
* Only includes properties with 100 or more units, arm’s-length sales
occupancy rates have climbed, the market may at some point begin to feel the pinch of the lack of inventory growth. Inventory is set to expand by only 351 rooms by the end of 2016, and a mere 167 rooms by the end of 2017. To date, there are no major expansions of room inventory planned until at least 2019. We think, despite this lack of planned developments, that visitor volume will end 2016 at a new high or near a new high, and we think gaming revenue might do the same.
37 Las Vegas Research & Forecast Report | Q3 2016 | Hotel | Colliers International
NORTHLAS VEGASNORTHWEST
WESTCENTRAL
SOUTHWEST
SOUTHLAS VEGAS
EASTLAS VEGAS
HENDERSON
AIRPORT
SUMMERLINDOWNTOWN
THE“STRIP”
RESORTCORRIDOR
15
215
215
95
95
Significant Hotel Sale Activity
Westin-Las Vegas Casuarina $66,530,000
826 Units - $81,000/Unit
January 2016
Casino Hotel
Element Hotel$17,100,000
123 Units - $139,000/Unit
April 2016
Full Service
Aliante Hotel and Casino $380,000,000
202 Units - $1,881,000/Unit
September 2016
Casino Hotel
Best Wester-Main Street $5,000,000
91 Units - $55,000/Unit
December 2015
Limited Service
Holiday Home$6,500,000
211 Units - $31,000/Unit
May 2016
Full Service
Sale Activity Continued
Property Name Sale Date Units Price Price/Unit Submarket Property Type
Stay Suite of America Dec 2015 128 $4,865,000 $38,000 West Vegas Limited Service
Extended Stay America Dec 2015 123 $3,049,000 $25,000 East Vegas Limited Service
Claremont Las Vegas May 2016 93 $2,100,000 $23,000 Resort Corridor Limited Service
Blue Moon Gay Resort Jul 2016 44 $1,400,000 $32,000 Resort Corridor Limited Service
Highland Inn Motel Aug 2016 50 $1,400,000 $28,000 South Vegas Limited Service
* Indicates a redevelopment site
38 Las Vegas Research & Forecast Report | Q3 2016 | Hotel | Colliers International
Market Comparisons - Las Vegas
Hospitality Market
TYPE TOTAL INVENTORY UNITS SOLD SALES VOLUME PRICE/UNIT COMPLETIONS THIS QUARTER COMPLETIONS YTD PLANNED
DOWNTOWN
CAS 7,589 - $0 n/a - - - FS - - $0 n/a - - - LS 938 - $0 n/a - - - Total 8,527 - $0 n/a - - -
LAS VEGAS “STRIP”
CAS 79,309 - $0 n/a - - 5,600 FS 5,815 - $0 n/a - - - LS 581 - $0 n/a - - -
Total 85,705 - $0 n/a - - 5,600
RESORT CORRIDOR
CAS 11,273 - $0 n/a - - 201 FS 5,091 - $0 n/a - - - LS 6,181 - $0 n/a - - - Total 22,545 - $0 n/a - - 201
AIRPORT
CAS - - $0 n/a - - - FS - - $0 n/a - - - LS 841 - $0 n/a - - - Total 841 - $0 n/a - - -
EAST LAS VEGAS SUBMARKET
CAS 1,913 - $0 n/a - - - FS - - $0 n/a - - - LS 2,571 - $0 n/a - - - Total 4,484 - $0 n/a - - -
HENDERSON SUBMARKET
CAS 2,281 - $0 n/a - - - FS 868 - $0 n/a - - - LS 1,480 - $0 n/a - - - Total 4,629 - $0 n/a - - -
NORTH LAS VEGAS SUBMARKET
CAS 1,021 202 $380,000,000 $1,881,188 - - - FS - - $0 n/a - - - LS 1,611 - $0 n/a - - 125 Total 2,632 202 $380,000,000 $1,881,188 - - 125
SOUTH LAS VEGAS SUBMARKET
CAS 2,853 - $0 n/a - - - FS 2,704 - $0 n/a - - - LS 1,330 - $0 n/a 124 - 211 Total 6,887 - $0 n/a 124 - 211
SUMMERLIN SUBMARKET
CAS 1,789 - $0 n/a - - - FS 123 - $0 n/a - - - LS 857 - $0 n/a - - - Total 2,769 - $0 n/a - - - WEST CENTRAL SUBMARKETCAS 3,425 - $0 n/a - - - FS - - $0 n/a - - - LS 2,188 - $0 n/a - - - Total 5,613 - $0 n/a - - - MARKET TOTALCAS 111,453 202 $380,000,000 $1,881,188 - - 5,801 FS 14,601 - $0 n/a - - - LS 18,578 - $0 n/a 124 - 336 Total 144,632 202 $380,000,000 $1,881,188 124 - 6,137
QUARTERLY COMPARISON AND TOTALS
Q3-16 144,632 202 $380,000,000 $1,881,188 124 0 6,137 Q2-16 144,508 334 $23,600,000 $70,659 0 0 4,167 Q1-16 144,508 927 $72,630,000 $78,350 0 0 4,925 Q4-15 144,508 2,241 $392,913,841 $175,330 0 2,376 3,634 Q3-15 144,508 958 $151,000,000 $157,620 -410 2,376 3,634 Q2-15 144,918 2,499 $442,001,950 $176,872 -2,988 2,786 4,169 Q1-15 147,906 2,888 $243,075,470 $84,167 -202 -202 4,124
39 Las Vegas Research & Forecast Report | Q3 2016 | Hotel | Colliers International
Market Indicators Relative to prior period Q3 2016 Q4 2016*
NO. SALES
ACREAGE SOLD
SALES VOLUME
PRICE PER SQUARE FOOT
*Projected
Land Sales Activity
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
Land Sales Activity
ACREAGE SOLD PPSF
Land Sales Lighter in Third Quarter
Research & Forecast Report
LAS VEGAS | LANDQ3 2016
The third quarter of 2016 saw land sales slow down compared to last quarter and compared to this time last year. This reversed five quarters of increasing land sales. In the third quarter, there were 36 land sales totaling 361.26 acres for a total sales volume of $81.7 million. The brought the year-to-date total for 2016 to 3,379 acres sold for a total sales volume of $457.0 million. The average sales price for land in Southern Nevada in the third quarter was $5.19 per square foot (psf), higher than in the last two quarters, but lower than one year ago.
Occupancy in industrial buildings increased to 94.8 percent in third quarter of 2016, despite continued development of new warehouse/distribution product. A total of 640,336 square feet of industrial space was completed in the third quarter of 2016 on 25.2 acres. An additional 9.3 million square feet of industrial space is either under construction or planned on 947.52 acres of land. During the third quarter of 2016, 199.4 acres of industrial land was sold, with total sales volume of $10.4 million. The average sales price of industrial land was $1.19 psf, a decrease from one year ago, and still impacted by sales of large parcels at Apex, the heavy manufacturing zone located to the northeast of the Las Vegas Valley.
Occupancy in commercial buildings increased in the third quarter of 2016 to 87.8 percent, 0.9 percentage points higher than in the third quarter of 2015. Demand for office product in Southern Nevada has shown steady improvement over the past three years, and this trend should continue. Retail demand picked up significantly in the third quarter after a mid-year lull, and we think it will remain strong for the foreseeable future. That being said, speculative construction of
> While land sales are up in 2016 overall, they decreased in the third quarter
> Apex continues to dominate land sales this year
> Development continues to be strong for multifamily and industrial properties
RESIDENTIALPermits
COMMERCIALForward Supply
COMMERCIALPermits
-16.7
Percent
-25.9
Percent
+61.0
Percent
Economic Indicators
Commercial Land Sales Activity
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
0
50
100
150
200
250
300
Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
Commercial Land Sales Activity
ACREAGE SOLD PPSF
Residential Land Sales Activity
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
$11.00
$12.00
0
100
200
300
400
500
600
700
800
Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
Residential Land Sales Activity
ACREAGE SOLD PPSF
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
$8.00
$9.00
$10.00
$11.00
$12.00
0
100
200
300
400
500
600
700
800
Q4-14 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Q2-16 Q3-16
Residential Land Sales Activity
ACREAGE SOLD PPSF
Market Health
Data Point 2014 2015 2016
Commercial Building Occupancy 86.4% 86.9% 87.8%
Industrial Building Occupancy 90.5% 94.5% 94.8%
Hotel Occupancy (Annual Average) 86.8% 87.7% 90.7%
New Home Sales (Jan-Jul) 3,151 3,564 4,061
Commercial Permits (Jan-Jul)1 183 183 215
Residential Permits (Jan-Jul) 5,936 6,615 8,715
Commercial Forward Supply2 (SF) 1.57 MM 1.66 MM 2.79 MM
Industrial Forward Supply2 (SF) 3.93 MM 9.29 MM 9.67 MM
Hotel Forward Supply2 (Rooms) 4,124 3,634 6,137
Taxable Sales (Jan-Jun) $17.5 BB $18.8 BB 19.5 BB
Employment (Annual Average) 883,900 917,000 933,1001 Includes permits for industrial projects2 Includes projects that are under construction or planned3 Data as yet unavailable
Land Sales
Year Sales Volume Acres Sold Price/SF
2016 YTD $456.8 MM 3,379 $3.10
2015 $625.9 MM 2,302 $6.24
2014 $763.2 MM 2,761 $6.35
2013 $613.3 MM 2,636 $5.34
2012 $264.1 MM 1,374 $4.41
2011 $160.1 MM 803 $4.58
2010 $51.3 MM 172 $6.86
2009 $198.0 MM 599 $7.65
commercial projects should remain light in 2016 as vacancy remains higher than normal. A total of 71,069 square feet of commercial product was completed in the third quarter of 2016 on 38 acres. An additional 2.8 million square feet of commercial product is under construction or planned on 652.4 acres. Average hotel occupancy in the first seven months of 2016 was 90.7 percent, a very strong number. Hotel occupancy has generally been on the rise over the past three years, and reductions in room inventory should keep this trend going in 2016. Over 6,100 new rooms are under construction or planned in Southern Nevada on 229.1 acres. During the third quarter of 2016, 21.4 acres of commercial land was sold. Total commercial land sales volume was $11.7 million. The average sales price of commercial land was $12.56 psf, a decrease of $2.41 psf from one year ago.
While development of single-family residences has lagged behind other forms of real estate development for the past three years, multifamily development continues to be quite strong. New home sales totaled 4,061 units in the first seven months of 2016. This is more than sold in the first seven months of 2015, indicating that sales are improving. Residential permits totaled 8,715 in the first seven months of 2016, compared to 6,615 units permitted in the first seven months of 2015, another indication that the single-family market is improving, albeit slowly. During the third quarter of 2016, 139.5 acres of residential land was sold. Total residential land sales volume was $59.5 million. The average sales price of residential land was $9.79 psf, a $4.147 psf increase from one year ago.
A single down quarter does not point to an overall slowdown in land demand by developers and investors. Developers appear to be ramping up construction of industrial buildings, and as the retail and office markets improve, new commercial developments will begin construction as well. Multifamily development might slow down after next year, and if it does, assuming the market remains healthy, multifamily developers will likely get back into an acquisition frame of mind to prepare for future development. In-migration into Southern Nevada appears to be improving now, and if it is demand for land will increase. We think land sales will continue at the present level into the fourth quarter of 2016, with the possibility for improvement by mid-year 2017.
41 Las Vegas Research & Forecast Report | Q3 2016 | Land | Colliers International
NORTHWEST
EASTLAS VEGAS
NORTHLAS VEGAS
NORTHEASTDOWNTOWN
SOUTHWEST
SUMMERLIN
WESTLAS VEGAS
AIRPORT
HENDERSON
15
215
215
95
95
Apex Power & US-9391.8 Acres - $3,441,000
$0.86/SF
March July 2016
Industrial - Apex
Significant Land Sale Activity
Corporate Center & Pecos5.0 Acres - $2,480,000
$6.00/SF
July 2016
North Las Vegas - Industrial
Olympia Chase & Oakland Hills29.0 Acres - $17,000,000
$13.46/SF
July 2016
Residential - Southwest
Windmill & Lindell9.5 Acres - $5,675,000
$10.23/SF
July 2016
Residential - Southwest
Apex Power & US-9381.9 Acres - $3,071,000
$0.86/SF
July 2016
Industrial - Apex
Land Sale Activity Continued
Property Name Sale Date Acres Price Price/SF Submarket Land Type
Sunridge Heights & Seven Hills Aug 2016 12.7 $2,000,000 $6.67 Henderson Residential
Post & Riley Aug 2016 5.0 $1,900,000 $8.72 Southwest Residential
Brooks & Clayton Sep 2016 9.0 $1,176,000 $3.00 North Las Vegas Industrial
Blue Diamond & Santa Margarita Aug 2016 1.4 $1,000,000 $16.64 Southwest Commercial
Gary & Fort Apache Jul 2016 2.5 $750,000 $6.89 Southwest Residential
42 Las Vegas Research & Forecast Report | Q3 2016 | Land | Colliers International
Market Comparisons - Las Vegas
Land Market
SUBMARKET SALES ACREAGE SOLD SALES VOLUME AVERAGE SALES PRICE (PER SQUARE FOOT)
AIRPORT - 0.00 $0 N/A
Commercial - 0.00 $0 N/AIndustrial - 0.00 $0 N/AResidential - 0.00 $0 N/A
APEX 3 180.23 $6,758,625 $0.86
Commercial - 0.00 $0 n/aIndustrial 3 180.23 $6,758,625 $0.86Residential - 0.00 $0 n/a
DOWNTOWN - 0.00 $0 N/A
Commercial - 0.00 $0 n/aIndustrial - 0.00 $0 n/aResidential - 0.00 $0 n/a
EAST LAS VEGAS - 0.00 $0 N/A
Commercial - 0.00 $0 n/aIndustrial - 0.00 $0 n/aResidential - 0.00 $0 n/a
HENDERSON 2 11.88 $3,000,000 $5.80
Commercial - 0.00 $0 n/aIndustrial - 0.00 $0 n/aResidential 2 11.88 $3,000,000 $5.80
NORTH LAS VEGAS 5 26.62 $3,790,306 $3.27
Commercial - 0.00 $0 n/aIndustrial 1 9.49 $2,480,306 $6.00Residential 4 17.13 $1,310,000 $1.76
NORTHEAST 3 9.72 $1,125,000 $2.66
Commercial - 0.00 $0 n/aIndustrial 3 9.72 $1,125,000 $2.66Residential - 0.00 $0 n/a
NORTHWEST 4 9.39 $2,652,500 $6.48
Commercial 2 3.39 $2,147,500 $14.54Industrial - 0.00 $0 n/aResidential 2 6.00 $505,000 $1.93
RESORT CORRIDOR - 0.00 $0 N/A
Commercial - 0.00 $0 n/aIndustrial - 0.00 $0 n/aResidential - 0.00 $0 n/a
SOUTHWEST 17 117.86 $63,385,820 $12.35
Commercial 4 13.36 $8,700,057 $14.95Industrial - 0.00 $0 n/aResidential 13 104.49 $54,685,763 $12.01
SUMMERLIN 1 4.62 $850,000 $4.22
Commercial 1 4.62 $850,000 $4.22Industrial - 0.00 $0 n/aResidential - 0.00 $0 n/a
WEST LAS VEGAS - 0.00 $0 N/A
Commercial - 0.00 $0 n/aIndustrial - 0.00 $0 n/aResidential - 0.00 $0 n/a
SUBTYPE TOTALS
Commercial Total 7 21.37 $11,697,557 $12.56Industrial Total 7 199.44 $10,363,931 $1.19Residential Total 21 139.50 $59,500,763 $9.79
MARKET TOTAL 35 360.32 $81,562,251 $5.20
QUARTERLY COMPARISON AND TOTALS
Q3-16 35 360.31 $81,562,251 $5.20
Q2-16 78 1,794.47 $203,549,098 $2.60
Q1-16 87 1,224.02 $171,697,465 $3.22Q4-15 97 610.53 $220,091,246 $8.28Q3-15 92 467.84 $143,792,608 $7.06Q2-15 61 324.47 $91,474,040 $6.47Q1-15 92 899.06 $170,589,500 $4.36The information contained in this report was provided by sources deemed to be reliable, however, no guarantee is made as to the accuracy or reliability.As new, corrected or updated information is obtained, it is incorporated into both current and historical data, which may invalidate comparison to previously issued reports.
43 Las Vegas Research & Forecast Report | Q3 2016 | Land | Colliers International
Copyright © 2016 Colliers International.
The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.
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