2 Q11 Market Beat Office Lv

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2Q11 Las Vegas Office Market Report

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2 Q11 Market Beat Office Lv

  1. 1. MARKETBEATLas VegasOffice RepORt 2Q11expanded MaRket cOVeRage RepORt www.cOMRe.cOMAT A GLANCE National and State Employment and• Overall vacancy rates decreased slightly from 23.46 percent in the first quarter to Unemployment Overview the current rate of 23.28 percent. Nevada is showing signs of a• Developers have halted any new de- stabilizing market. Tourism has velopment based on the current funda- increased, visitor volume is mentals of limited to no financing, high up, conventions are up and we vacancy and reduced tenant demand at now have former Mayor Oscar lower effective rates. Goodman working part time with the Convention Authority• Average asking rental rates in the Las to promote Las Vegas. Things Vegas office market are at $1.95 per are looking up for the Las Vegas square foot per month (psf/mo) full Market. We should not see any service gross (FSG). This is a decrease more major jumps in the labor from last quarter rental rates of $2.00 market like we have seen in the psf/mo (FSG). past few years. We may however, still see a wave effect of job growth quarter by quarter,• The economic outlook is starting to for the next few years. The market may see job growth one quarter and then losses the next show signs of stabilization, as net ab- quarter, but no big jumps. The Department of Employment, Training and Rehabilitation sorption is in the positive for the first (DETR) reported that “Through the first five months of 2011, job levels in Nevada are time since 2008. essentially unchanged from the same period in 2010, down by just 0.1 percent. To put that in perspective, at the height of the recession in Nevada, in 2009, job losses came in at 9.1• Tourism has increased, visitor volume is percent. These results are certainly consistent with the “stable” theme evident in many of up, conventions are up and we now have our recent assessments of Nevada’s labor market.” The construction industry lost 1,500 former Mayor Oscar Goodman working jobs at the end of 2010; however throughout 2011 it has recovered 1,400 jobs. Due to the part time with the Convention Authority re-opening of a casino in Reno, the leisure and hospitality industry added 900 jobs. The to promote Las Vegas. professional and business sector saw another job loss of 1,100 jobs, adding to 2,100 jobs lost in 2011. The Center for Business and Economic Research (CBER) at UNLV reported that they “expect little change in future job growth through the first half of 2011.” The national unemployment rate is currently 9.1 percent, a rise from 8.8 percent we witnessed last quarter. This unemployment rate is equal to roughly 13.9 million unemployed workers that are now drawing unemployment insurance benefits. In May, Stats on the Go Average Lease Rates Average Sale Prices User I nvestment Rent Vacancy Change since: 500,000 $35.00 25.0% 450,000 Current 1Q11 2Q10 23.0% 400,000 $28.00 21.0% Office Vacancy 23.28% 350,000 19.0% 300,000 $21.00 17.0% Lease Rates $1.95 (FSG) psf/yr msf 250,000 15.0% 200,000 $14.00 13.0% Net Absorption* 335,700 150,000 11.0% 100,000 $7.00 9.0% New Supply 204,500 50,000 7.0%*The arrows are trend indicators over the specified time period and do notrepresent a positive or negative value. (e.g., absorption could be negative, but 0 $0.00 5.0%still represent a positive trend over a specified period.) 2Q10 3Q10 4Q10 1Q11 2Q11 2008 2009 2010 2011F 2012F Cushman & Wakefield Commerce Real Estate Solutions of Clark County 3800 Howard Hughes Parkway, Suite 1200, Las Vegas, 89169 (702) 796-7900 www.comre.com ©2011, Commerce Real Estate Solutions. Disclaimer: The above information is given with the obligation that all negotiations relating to the purchase, renting, or leasing of the property described above shall be conducted through Commerce Real Estate Solutions. No warranty or representation, express or implied, is made as to the accuracy of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other encumbrances, withdrawal without notice, and to any special listing conditions imposed by the seller. Prospective buyers should conduct their own due diligence.
  2. 2. MARKETBEAT Las Vegas Office RepORt 2Q1122 states recorded unemployment rate increases, however 27 total market). Net absorption, the measure of space leased fromstates posted jobless rates significantly lower than the national one reporting period to the next, for the second quarter, showedrate. The highest regional jobless rates were again in the Western a positive increase once again from a -23,097 sf in first quarter topart of the country, while the Northeast recorded the lowest rates. 162,577 sf during second quarter. This is the first time since thirdNevada continues to show the highest unemployment rates in the quarter 2008, when net absorption was 457,505 sf, that the Lasnation and has been in the double-digits for the past 28 months. Vegas office market has seen a positive net absorption number.The last time we were in the double-digits for this length of time Gross space leased followed suit with positive growth, growingwas in 1980 and that only lasted for 15 months straight. The states from 907,528 sf during first quarter 2011 to 923,628 sf of grosswith the next highest rates were California at 11.7 percent and space leased in the second quarter 2011. The Southwest submarketRhode Island at 10.9 percent unemployment rates. North Dakota showed the greatest amount of positive change in absorption withreported the lowest jobless rate, 3.2 percent, followed by South over 181,102 sf for the quarter, while the Airport submarket postedDakota and Nebraska, 4.8 and 4.1 percent, respectively. Nevada the least amount with -41,116 sf of negative absorption.also held the record this quarter as the state with the largest over-the-month unemployment rate decrease, which shows a good sign Professional Office: Quarterly Vacancy 6% 1% 8% 8% 8%of stabilization. 25% .4 5% .3 .2 .1 .0 23 23 23 23 23 .0 9% 0% 23 1% 3% .7 .5 .1 20 20 .8 20 19 20% 0% 8% 0% .3 .9 .8 17 16 16 0% 15% 6% .8 8% 14 .6 5% 15% .1 13% 13 13 .4 12 11% Las Vegas – 12.4% Nevada – 12.1% 10% 9% US – 9.1% 7% Unemployment rates 2Q11 5% 5% 3% 0% 7 7 7 8 8 8 8 9 9 9 9 0 0 0 0 1 1 1% 20 30 40 10 20 30 40 11 21 31 41 11 21 10 20 30 40 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q -1% 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 Professional Office: Quarterly Absorption (SF) 1,000,000 800,000 600,000Las Vegas Market Overview 400,000 200,000 -Office Market (200,000) (400,000)Vacancies (600,000) (800,000)The office vacancy rate saw a slight decrease during the second (1,000,000)quarter to 23.28 percent, in comparison to 23.46 percent in the first 7 8 8 7 7 8 8 9 9 9 9 0 0 0 0 1 1 30 40 10 20 30 40 11 21 31 41 11 21 30 40 20 10 20 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Qquarter. The Central West submarket has replaced the Downtownsubmarket with the lowest vacancy rate. Currently, the Central Professional Office: Inventory (SF) and Vacancy Rate (%)West submarket has a vacancy rate of 18.18 percent. Downtown 50,000,000 25%is not far behind with a vacancy rate of 18.71 percent and the 45,000,000 20%Southwest submarket is at 20.93 percent. The high vacancy ratesin the Northwest (42.5 percent), Southeast (25.87 percent) and 40,000,000 15%Airport (24.54 percent) submarkets are driven by weak tenant 35,000,000 10%demand and marginal stability, combined with lease concessions, 30,000,000 5%defaults and downsizing. Vacancy rates by class types all haveshown decreases during the quarter with Class A decreasing to 25,000,000 0% 7 7 7 8 8 0 8 8 9 9 9 9 0 0 0 1 1 30 40 10 20 30 40 11 21 31 41 11 21 20 40 10 30 2033.42 percent from 34.74 percent, Class C showing a decrease Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Quarterly Inventory Overall Vacancy Ratesin vacancy rates to 22.10 percent from 22.38 percent, and ClassB office space showing another increase to 22.09 percent from21.99 percent. Available sublease space showed another huge gain Note: Due to reclassifications of, and adjustments to, data betweenfrom fourth quarter at 212,189 sf, first quarter at 329,384 to the reporting periods, the commercial market data for the latest quartercurrent total of sublease space of 421,467 sf (1.01 percent of the may not necessarily be comparable to a previously reported quarter. Cushman & Wakefield Commerce Real Estate Solutions of Clark County 3800 Howard Hughes Parkway, Suite 1200, Las Vegas, 89169 (702) 796-7900 www.comre.com ©2011, Commerce Real Estate Solutions. Disclaimer: The above information is given with the obligation that all negotiations relating to the purchase, renting, or leasing of the property described above shall be conducted through Commerce Real Estate Solutions. No warranty or representation, express or implied, is made as to the accuracy of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other encumbrances, withdrawal without notice, and to any special listing conditions imposed by the seller. Prospective buyers should conduct their own due diligence.
  3. 3. MARKETBEAT Las Vegas Office RepORt 2Q11 Professional Office: Office Employment vs Vacancy Rate (%) Office Owner User Sales: User Sales (SF) and Average Price Per Bldg (SF) ($) 350,000 25% 300,000 $300.00 23.28% 23.08% 250,000 $250.00 325,000 20% 20.79% 200,000 $200.00 300,000 17.30% 15% 150,000 $150.00 275,000 10.88% 13.22% 10% 100,000 $100.00 250,000 50,000 $50.00 5% 225,000 - $0.00 7 7 7 8 8 9 8 8 9 9 9 0 0 0 0 1 1 20 30 40 10 20 30 40 11 21 31 11 21 30 10 41 200,000 0% 20 40 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 6 7 8 9 0 1 40 40 41 21 40 40 Owner user sales sf Average Price Per Bldg sf Q Q Q Q Q Q Professional Office Submarket - Direct vs Sublease Vacancy 50.00% Office Investment Sales: Investment (SF) and Average Price Per Bldg (SF) ($) 45.00% 800,000 $450.00 40.38% 40.00% 700,000 $400.00 35.00% 30.00% 600,000 $350.00 25.87% 25.00% 23.92% 24.54% 23.28% $300.00 21.32% 20.93% 21.56% 500,000 18.71% 20.00% 18.18% $250.00 15.00% 400,000 $200.00 10.00% 300,000 $150.00 5.00% 1.75% 0.00% 0.45% 1.28% 1.25% 0.99% 0.90% 0.69% 0.00% 1.01% 200,000 $100.00 0.00% Las Vegas Northwest Downtown Central East Central West West Southwest Airport Southeast North Area Total 100,000 $50.00 Vacacny % 40.38% 18.71% 23.92% 18.18% 21.32% 20.93% 24.54% 25.87% 21.56% 23.28% - $0.00 0.00% 0.45% 1.28% 1.25% 1.75% 0.99% 0.90% 0.69% 0.00% 1.01% 7 8 7 7 8 8 8 9 9 9 9 0 0 0 0 1 1 Sublease % 20 30 40 10 20 30 40 11 21 31 41 11 21 30 40 20 10 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Investment sales sf Average Price Per Bldg sf Professional Office: Building Class With the growth of building sales, lease rates are expected to Class C remain low for many more years to come. By second quarter 2011, the market reported average asking rents of $1.95 sf/FSG, Class B a drop from the first quarter of $2.00 sf/FSG rate. The current asking lease rate is higher however, than the rate we witnessed Class A in second quarter 2010 at $1.89 sf/FSG. Landlords are starting to level off with price adjustments and still with high concessions, Class A Class B Class C lease rates are stabilizing but are still lower than the rates we have Sublease SF 8 3,15 0 23 8 ,8 4 3 99 ,4 7 4 Vacancy 1 ,4 47 ,93 5 3,4 92 ,3 2 3 4,78 4 ,5 82 seen in the past. Six out of the nine submarkets showed asking rental rate decreases. Existing SF 4,331,526 15,808,103 21,640,196 The highest decrease was in the Northwest submarket at $1.73 sf/Pricing (Sales and Average Asking Rents) FSG from $2.36 sf/FSG. Two submarkets that saw an increase in asking rental rates were the North submarket to $2.01 sf/FSGWith the growth of bank owned / foreclosed properties that have from $1.87 sf/FSG and the West submarket to $2.02 sf/FSG fromcome on in the market, we are also starting to see a growth in $1.91 sf/FSG.office building sales. Starting in fourth quarter 2010, there was atotal of 676,240 sf of inventory sold. This is the largest amount of Average asking rents by class from the Top Tier Class A segment,sold product since fourth quarter 2007. The start of 2011 is also showing $2.80 sf/FSG to the Lower Tier Class A building ratesshowing positive sales results. During first quarter 2011, there dropping to $2.50 sf/FSG. Also above the average asking rates inwas a total of 372,088 sf of sold inventory with an average price the valley were Top Tier Class B buildings that reported averageper building sf of $168.26; and second quarter is showing even asking rents of $2.16 sf/FSG. Pricing for properties that are belowbetter numbers with 506,200 sf of sold inventory with an average the market average are in the Lower Tier Class B buildings atprice per building sf of $164.40. Compared to first quarter 2010’s $1.82 sf/FSG and Class C properties at average rates from $1.56127,269 sf of inventory sold, the current numbers show the sf/FSG (Top Tier C) to $1.48 sf/FSG (Lower Tier C). Please Note:improvement. This is a great time for investors or owner users the average asking rates do not take into consideration free rentto invest in office properties in the Las Vegas market due to the and rental concessions. Actual lease rates are found to be 10-30quality inventory and current asking prices. percent lower than the published asking lease rates. Cushman & Wakefield Commerce Real Estate Solutions of Clark County 3800 Howard Hughes Parkway, Suite 1200, Las Vegas, 89169 (702) 796-7900 www.comre.com ©2011, Commerce Real Estate Solutions. Disclaimer: The above information is given with the obligation that all negotiations relating to the purchase, renting, or leasing of the property described above shall be conducted through Commerce Real Estate Solutions. No warranty or representation, express or implied, is made as to the accuracy of the information contained herein, and same is submitted subject to errors, omissions, change of price, rental or other encumbrances, withdrawal without notice, and to any special listing conditions imposed by the seller. Prospective buyers should conduct their own due diligence.

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