Experts: Las Vegas has strong industrial market

Thursday, May 15, 1997 | 11:59 a.m.

Two independent sources studying land use have arrived at the same conclusion about Southern Nevada's industrial market -- it's going to continue to thrive over the next 18 months.

Growth is occurring despite the city having among the highest industrial rental rates in the nation, according to a third report.

Whether the growth is steady or explosive is open to interpretation as 1997 and 1998 projections are compared with 1996 statistics, which were healthy due to high demand at the time.

Absorption -- filling the available space -- was actually down 26 percent in the industrial category in 1996 as companies filled about 2.6 million square feet in Southern Nevada compared with 3.5 million square feet a year earlier, according to a report prepared by Robert Charles Lesser & Co. for the Washington, D.C.-based Urban Land Institute.

"There is a substantial increase in the total new square footage in the industrial in the first quarter of this year (1997)," said Kevin Higgins, senior vice president of industrial properties for CB Commercial. "Las Vegas is the fastest growing city in America thus fueling the large demand for space right now. That is why the market can grow so rapidly and still maintain low vacancy rates."

Higgins, who is accredited by the Society of Industrial and Office Realtors, said in addition to industrial properties that are completed or under construction now, there are another 2 million square feet of properties planned. How fast absorption will occur is the unknown factor that will drive future development.

Higgins explained that vacancy rates on the industrial market are at 7.4 percent. A year earlier at this time, it was at 2.5 percent. Higgins said there was a huge increase in new space developed in the fourth quarter of 1996 and the first quarter of 1997.

Dean Schwanke, a senior researcher with the Urban Land Institute, said the 7.4 percent vacancy rate is very close to the national average of 7.3 percent.

On the expense side, a 1997 real estate planning guide reviewing values, trends and opportunities in 148 markets worldwide, published by New America International Inc., listed Las Vegas as having the second highest industrial manufacturing facility rental rates and the fifth highest bulk warehouse rentals in the country.

Low vacancy rates have pushed up demand and rental rates, publishers of the report said. Las Vegas trailed only Santa Clara County, Calif., with its average of $8 per square foot for industrial manufacturing rents and Denver, San Francisco, Honolulu and San Mateo County, Calif., with its $5.40 a square foot rental rate for bulk warehousing.

The two largest growth areas in Southern Nevada are North Las Vegas and southwest Las Vegas.

North Las Vegas has more than 7.5 million square feet of space with 1.7 million under construction and 643,000 square feet planned. The southwest region has 12.9 million square feet total, 991,000 square feet under construction and 661,000 planned.

Two buildings under development by Security Capital Industrial Trust will provide nearly 200,000 square feet in North Las Vegas while the first phase of the Sunset and Valley View Distribution Center, under development by Majestic Realty, will provide 360,000 square feet more in the southwest part of the city.

In all real estate categories, the Urban Land Institute pegs Las Vegas as a growth market that won't exceed previous performance.

"This market recorded the highest employment growth rate in the country in 1996, an astronomical 8.16 percent growth rate for the year, yet the substantial amount of new construction in that market will allow performance measure to improve only modestly," the nonprofit research institute said in its "ULI 1997 Real Estate Forecast."

"Construction in both the Las Vegas office and industrial sectors, for example, equaled or exceeded absorption in both 1995 and 1996, one of the few markets in the country where this has occurred," said the report. "And in the housing sector ... over 400 residential developments are actively selling properties in Las Vegas, leading to a highly competitive environment. This competition has kept prices virtually flat for three years."