The commercial real estate industry in Southern Nevada has entered 2022 on an upturn and is still flourishing, despite some headwinds. It’s being fed by the substantial economic growth in the Las Vegas Valley, strong demand along with a development industry that is ablaze with activity.
2 sectors are best positioned to thrive in 2022.
■ The industrial sector remains strong and resilient. There has been a growing demand for space that is outpacing our local supply. Smaller facilities remain in demand, while e-commerce companies are looking to lease or build larger warehouses ranging from 500,000 square feet to 800,000 square feet.
The North Las Vegas market continues to be active, with most projects designed to meet the needs of e-commerce companies, such as Amazon and Fanatics. Other submarkets like Henderson and the area around the airport have attracted very large users like FedEx and Kroger.
On the agenda for 2022, plans include another 18 million square feet of planned industrial space to be built, although most of these projects won’t be finished until 2023 and are already spoken for. Southern Nevada absorbed more than 10 million square feet of industrial space in 2021. According to developers, competition is at unprecedented levels and everyone wants a piece of the industrial market, creating a huge shortage of materials and escalating land prices.
■ The office sector continues its ongoing recovery from COVID-19 and associated lockdowns. Asking rental rates increased to $2.27 on a full-service basis. Office inventory increased by over 93,000 square feet in the fourth quarter of 2021, bringing year-to-date deliveries to over 178,000 square feet.
Southern Nevada had nearly 675,000 square feet of office space under construction at year’s end, the most space under construction since 2014. We also had three quarters of strong net absorption in 2021, with occupancy increasing by 930,000+ square feet this year.
Looking forward, the state of our tourism industry will be a key metric in Southern Nevada’s recovery. This year, the local economy is expected to continue progressing along that road — even with new COVID-19 variants overshadowing the headlines Sothern Nevada has experienced recent population growth, rising gaming revenues and a steady return of tourists enjoying all Las Vegas has to offer. After record-breaking gaming revenue numbers through the end of 2021, industry experts are predicting Las Vegas could see a full recovery by 2023.
Still, Nevada’s recovery has been uneven. For instance, Northern Nevada’s employment numbers have now exceeded pre-pandemic levels, while in Southern Nevada, the same cannot be said. And, while gaming revenues are up, local hotel room occupancy levels are not back to pre-pandemic peaks. Of course, the Las Vegas area was one of the hardest hit in the U.S. because of its heavy reliance on travel and tourism.
Large conventions have begun returning to Las Vegas, however with the omicron surge, some of the larger companies that attend such conventions have switched to online participation; in particular, the insurance and financial sectors.
Additionally, international travelers, who account for up to 20 percent of all Las Vegas visitors in recent years, have been slow to return.
There are likely to be continued challenges with rapidly rising material costs, supply chain issues, inflation, land constraints, omicron and concerns over our water supply. Nonetheless, the commercial real estate sector is expected to continue on an upward trajectory over the next couple of years at least.
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