Las Vegas industrial market keeps losing steam

The Las Vegas industrial market continued to weaken in the fourth quarter as pricing declined and vacancies increased, business advisory firm Applied Analysis reported.

Vacancy edged up to 16.9 percent on industrial inventory of 103.6 million square feet, compared with 16.5 percent in the third quarter and 14.5 percent in the year-ago quarter. The vacancy rate has risen for 17 consecutive quarters and is at an all-time high, the firm reported.

As the supply of vacant industrial space rises, pricing continues to adjust downward, with average asking rents falling for the eighth consecutive quarter. Rents declined to 56 cents a square foot in the fourth quarter, down 1 cent from the previous quarter and down 7 cents from a year ago.

“With nearly three years of excess supply when demand returns, it can be expected that prices will remain suppressed, potentially causing additional properties to be returned to lenders,” Applied Analysis project manager Jake Joyce said.

As it does in the housing market, an abundance of bank-owned industrial properties on the market creates investment opportunity at prices not seen in six years, he said.

The return of positive net absorption was short-lived in the Las Vegas industrial sector as 376,545 square feet of industrial space was vacated during the fourth quarter, commercial brokerage Colliers International reported. Net absorption for 2010 was negative 1.1 million square feet.

“We think that gross absorption will generally continue its upward trend as the national and regional economies slowly recover,” Colliers research director John Stater said. “Net absorption will probably bounce between positive and negative in 2011.”

Industrial vacancy was 15.8 percent in the fourth quarter, up 0.3 percentage points from the previous quarter and up 1.3 percentage points from a year ago, and will probably remain in double digits until either the industrial work force catches up to excess supply or the market loses excess capacity to redevelopment, Stater said.

CB Richard Ellis showed the vacancy rate at 11.7 percent, up from 10.2 percent at the end of 2009. Average asking lease rate across all submarkets of the Las Vegas Valley remained relatively stable at 56 cents a square foot, down 6 cents from a year ago.

Industrial development in the valley is nonexistent, with no projects under construction and virtually nothing planned, CB Richard Ellis said in its fourth-quarter report.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.