Northern Nevada
By Angel Orozco, CBRE
The Reno industrial market was comprised of approximately 114 million sq. ft. at the close of Q1 2024. There was over 2.7 million sq. ft. of new product delivered to the market in Q1 2024. The construction pipeline had over 960,000 sq. ft. underway with another 17.3 million sq. ft. in various planning stages. The overall average asking lease rates closed Q1 2024 at $0.86 NNN. West Reno and South Reno posted the highest average asking rates at $0.96 NNN and $1.01 NNN, respectively.
During Q1 2024, the overall vacancy rate increased to 7.2 percent, while the availability rate reached 10.1 percent. Notably, this quarter marked the first instance of negative absorption since Q3 2019, resulting in – 752,000 sq. ft. of net absorption. Despite stable demand, the market faced challenges due to an influx of 2.7 million square feet in deliveries, significant lease expirations, and the introduction of new sublease space.
Looking forward, vacancy and availability are expected to decline as newly delivered projects begin to lease. Additionally, the Reno market is not expecting any new deliveries until late 2024 to early 2025. The demand for electric vehicle (EV) and related supply chain manufacturing, along with data center users will continue to drive growth in the Reno market.
Southern Nevada
By Laura Wilhelm and Garrett Toft, CBRE
The Las Vegas industrial market posted positive net absorption, totaling 1.8 million sq. ft. in Q1 2024. Fully leased, large warehouse buildings delivering in the Apex and North Las Vegas submarkets contributed to the majority of this net absorption. The overall vacancy rate continued to rise, from 3.2 to 4.7 percent. After experiencing historically low vacancy rates in 2022, the market has witnessed a significant increase in new construction over the past several quarters. 2023 set a new record for the amount of space completed within a single year with 11.3 million sq. ft. delivering, and in Q1 2024 alone, 4.4 million square feet was completed.
Projects still under construction as of the end of Q1 totaled approximately 13.3 million sq. ft. Although the construction pipeline remains elevated, it should drop considerably over the course of 2024 as new starts are expected to be nominal. To illustrate, only 436,000 sq. ft. broke ground during Q1, compared to last quarter’s 1.7 million sq. ft.
Tenant demand remains positive; however, it is unlikely to surpass the record levels of construction delivered for several quarters. The market should begin to normalize in 2025 as limited new construction starts are expected this year.
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