Vegas commercial real estate market heats up

Jennifer Robison

Wednesday, July 17, 2002 | 11:03 a.m.

Vacancy rates in the Las Vegas Valley's retail and office markets reversed a year-long rise in the second quarter, said analysts with commercial real estate firm Colliers International and research company Restrepo Consulting Group.

Statistics released Tuesday by Colliers and Restrepo show the valley's retail vacancy rate dropped from 3.5 percent at the end of the first quarter to 3.2 percent at the end of the second quarter, a trend analysts attributed to rising demand among retailers.

However, retail brokers said times aren't easy for all retail developers looking to lease up space.

"Unless they're serving a niche, developers' projects are not filling up quickly," said Scot Marker, a retail broker with Colliers International. "A couple of years ago, developers were taking orders faster than they can fill them. Now, builders who are on their second or third project in a submarket are having to get creative. They're having to negotiate more."

Office vacancies have fallen as well, from 13 percent at the end of the first quarter to 12.5 percent at the second quarter's close. Analysts credited slowed construction for the improved office-market performance.

Even as the office market strengthens, landlords and tenants alike must contend with operating expenses and how they affect lease structures.

"With Nevada Power Co.'s rate increase, major office users are looking at their internal numbers and getting creative in how they minimize other costs in the building," said David Afromsky, an office broker with Colliers International. "Landlords are more cautious about how much of a tenant's energy expenses they pay for. Tenants are more cautious about leaving the lights on after hours."

Though vacancy rates in the valley's industrial sector rose slightly in the second quarter -- to 9.5 percent, compared to 9.3 percent at the first quarter's end -- Colliers International brokers said they believe the worst has passed for the local industrial market.

"We've hit bottom," said Michael DeLew, a Colliers International industrial broker. "We're still seeing some defensive posturing among local businesses. But the moral of the story is our industrial vacancy rate is very moderate, especially when compared to other regional markets like Phoenix, where the vacancy rate is 15 percent."