ReD Report – Office Summary: First Quarter 2024 – Nevada Business Magazine

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Northern Nevada

By Jordan Lehman, Colliers Reno

Reno’s office market experienced robust tenant demand, recovering sales activity, and a slight uptick in available sublease space. Net absorption nearly reached 102,000 square feet this quarter, which was the largest total in the last four and a half years. Office sales totaled $38.1 million in the first quarter after a very slow 2023. New available sublet opportunities hit the market this quarter, pushing the sublease availability rate to 15.5 percent of all available space.

Northern Nevada saw strong job growth this year with the addition of 6,500 jobs since February 2023. Reno’s unemployment rate grew 50 basis points since last quarter, reaching 4.2 percent, though it is still down 30 basis points year-over-year.

Reno’s sublease market grew slightly this quarter with the addition of a few smaller sublease availabilities. The region now has more than 156,000 square feet of available sublease space on the market, which accounts for 15.5 percent of all available space, and is up from just 14.3 percent last quarter. However, this total is still roughly half of the previous peak set in early 2023. With continued strong tenant demand and steadily recovering investment activity, the future of Reno’s office market looks bright in the year ahead.

Southern Nevada

By John Stater, Colliers Las Vegas

After hitting a recent low vacancy rate in the second quarter of 2023, office vacancy has increased for two consecutive quarters. Southern Nevada had -118,759 square feet of net absorption in the first quarter of 2024, sending vacancy up to 11.4 percent. The weighted average asking rental for office space decreased to $2.53 PSF on a full-service gross (FSG) basis.

Through most of 2023, southern Nevada’s office market sustained healthy numbers in terms of vacancy and asking rental rates. The fourth quarter of 2023 saw weak demand for office, and this was amplified in the first quarter of 2024, mostly in class B office buildings. From 2021 to mid-2022, class B office posted a total of 905,080 square feet of net absorption and was a strong point of the local office market.

Since mid-2022, class B office had -573,131 square feet of net absorption while asking rental rates increased by 8.5 percent. Over the same period, class A office had 654,119 square feet of net absorption and 2.5 percent rent growth.

The last two years of data suggest that class B landlords need to focus on their competitivity with class A buildings, specifically in regard to price. The challenges to the office market, from work-at-home to smaller, more efficient work forces, is well known and must not be ignored by landlords.

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