Report: Las Vegas Valley industrial real estate vacancies hit 11-year high
Industrial real estate vacancies in the Las Vegas Valley hit their highest level in 11 years in the first quarter, according to a new report.
The valley’s vacancy rate increased by 40 basis points from the last quarter of 2024, hitting 9.5 percent, a rate not seen in more than a decade, according to the report from CBRE Group Inc.
The uptick was caused by a building and financial boom from 2021 to 2023 kicked off by low interest rates during the pandemic, said Garrett Toft, a vice chairman for CBRE in Las Vegas, who has worked in the industrial real estate sector for 20 years.
“Coming out of (those years) we basically delivered twice as much (space) as we would deliver in any year,” he said. “And it all kind of came (online) right at the same time …. So you have all this supply coming online and then demand slows down and we went from absorbing around 10 million square feet of space a year to last year in 2024, we only absorbed 3.2 million square feet of space.”
According to the CBRE report, the construction pipeline (currently at 7.7 million square feet) for industrial space has been “gradually” decreasing since a high water mark set in the third quarter of 2023 (20 million square feet). The valley’s industrial market has also seen a record-breaking influx of more than 46 million square feet of new projects, and at the end of the first quarter approximately 25 percent of this recently delivered space remained unoccupied.
Absorption of space will continue
However, the local market is not worried, said Toft, and he is confident absorption will continue to drive the vacancy rate down over the coming quarters. A slowdown in building will help as well, he said.
“It’s important to note that every quarter since the market has been slowing down here, we are still absorbing more space, and we still have positive net absorption, it’s just not enough to compensate for the space that’s being delivered,” he said.
Toft said the first-quarter vacancy rate most likely represents a high point in the market cycle, because new construction has stopped. He pointed to two submarkets specifically — North Las Vegas (including Apex Industrial Park) and Henderson — as having higher supply and vacancies than other areas across the valley.
“So on a go forward basis you are not going to be delivering any meaningful supply for awhile, and the tenant demand and what were seeing for leases out for signature is up significantly,” he said. “Even in those submarkets that are overbuilt I think you are going to see quite an uptick in demand in the next quarter, and I think that will help stabilize the market.”
Vacancy rates within the industrial space actually hit a record low (0.9 percent) in the second quarter of 2022 during the pandemic, according to the CBRE report, due to high demand for warehouse and distribution space. Currently, the industrial submarket with the highest vacancy rate is distribution space (20.3 percent), followed by light distribution (12 percent). CBRE expects the vacancy rate to rise above 10 percent in the second quarter, signalling a peak in the market that will gradually decrease by the end of the year.
Regarding construction of industrial space in the Las Vegas Valley, approximately 25 percent of the inventory has been built over the past five years, which the report said highlights a rapid growth movement to meet demand. The report also noted that the current market conditions could put downward pressure on pricing moving forward.
“The market has shifted to be more tenant-friendly, with landlords becoming more flexible and competitive to secure deals,” read the report. “This could influence the types of sales and leases being negotiated. A rising overall vacancy rate and increase in available space may lead to a more competitive pricing and opportunities for buyers as well.”
Contact Patrick Blennerhassett at pblennerhassett@reviewjournal.com.
