HENDERSON SUBMARKET SPONSORED BY:

SUBMARKET OVERVIEW

Steve Neiger, CCIM / Colliers International

As of Q2, 2020, the Henderson Southeast Submarket consisted of approximately 21,795,300 SF, making up an impressive 18.6% of the entire Southern Nevada retail market (116.6 million SF in total). Within this submarket, power centers and malls are 3.7 million SF, or about 17% of the total retail. The remainder is comprised of general retail properties, neighborhood, and strip centers. Reported absorption rates have been somewhat volatile due to new projects coming to market. Most recent Costar reports show a positive net absorption of 76,600 SF. The submarket’s vacancy rate was a relatively healthy but average 7.2%, putting it in the middle of the pack compared with the rest of submarkets’ rates.

Market rents for the Henderson Southeast Submarket were sitting at a nice and round $24 PSF annually, which is above the general market average, as expected. This submarket has stronger than average demographics and steady growth rates, which make it a very appealing submarket for retail tenants of all kinds. Retail rents have risen a respectable 3.9% year-over-year, though the coming 12 months may not see such progress, and are currently forecasted at just 1.6%.

Fifty-Four retail properties traded in the prior 12 months in the submarket; the average price coming in at $182 PSF. Sold properties had an average cap rate of 6.6% and an average vacancy rate of 9.4%. The average sales price was $2.5 million, and the average size of the property was 12,428 SF. As with prior years, this submarket is characterized by heavy trading of smaller retail properties. Notable transactions include the Eastgate Plaza (excluding the Walmart) for $21.5 million and the Anthem Highlands Shopping Center for $40.25 million.

Now for perhaps the most exciting news of all for the Henderson Southeast Submarket: new construction. The submarket saw 86,000 SF under construction during the prior 12 months. While new development has been steady in this submarket for years, three new projects are bringing exciting new energy to Henderson: Lifeguard Arena on Water Street, the new home for the Silver Knights, will finish construction soon; The massive Raiders Practice Facility just opened for business this past summer in West Henderson; and finally, funding for the new Henderson Event Center, capable of seating over 6,000 people, was approved by the city in May 2020.

I would be remiss if I attempted to conclude a retail submarket report in 2020 without mention of COVID-19. Though not an issue specific to the Henderson Southeast Submarket, COVID-19’s effect on the retail industry (including F&B and experiential real estate), especially during the initial shutdown that began in March, was dramatic. 2020 for retail CRE brokers and developers may go down as “the year everyone wanted drive-thrus.” There was an immediate impact on both retail sales and leasing. The pandemic has forced most retail tenants to adjust the way they conduct business just so they can survive these weird, challenging times. Short term pains are expected, as industry experts anticipate a rise in vacancies in the coming months, though it is mostly only speculation at the time of this writing. The general consensus among industry professionals though, is an optimistic one: we will conquer this pandemic someday soon, one way or another. The good news is, with so many new and unique commercial developments coming online, that the Henderson Southeast Submarket is well-positioned to benefit tremendously once COVID-19 is in our rearview.

Taber Thill, SIOR / Colliers International

The Henderson Submarket consists of 281 office buildings totaling just under 5.5 million SF, and its borders are defined by Henderson City limits. The bulk of the Henderson Submarket is comprised of Class B and Class C buildings with only eight Class A buildings totaling 583,905 SF. The vacancy rate for Henderson in Q2 2020 was 13.9%, which is a 4% increase from Q2 2019, and the average asking lease rate has increased by $0.12 PSF to $2.36 PSF FSG (full service gross) from this time last year. The Henderson Submarket has a wide range of tenants and is a surrounded by a number of large master-planned communities such as Green Valley, Seven Hills, MacDonald Highlands, Anthem, and Inspirada.

Year-to-date, newly completed office product in the Henderson Submarket totaled 47,644 SF. The most notable office project currently under construction in this submarket is Stable Development’s 300,000 SF Village @ West Henderson located on St. Rose Parkway and Seven Hills Drive. With construction beginning Q3 2020, the first phases will be complete in Q4 2021 with the remainder scheduled for a mid-2022 delivery. The project will contain office and retail with a small high-end residential component.

In addition to new office construction, the Raiders completed a $75 million headquarters and practice facility in Henderson. The Raiders practice facility includes a 50,000 SF player performance center and one-and-a-half artificial turf football fields. This 55-acre site is located near the Henderson Executive Airport and will include some to-be-determined mixed use development.

The majority of the submarket’s growth is in West Henderson where the office market is following the new retail and housing developments.

Jerry Doty, SIOR / Colliers International

In Q2 2020, despite the COVID-19 shutdown, the Henderson Submarket remained strong. With positive net absorption of 185,198 SF, increased asking rates, and vacancy still at a near record low, there are several signs that the Henderson Submarket will continue to be healthy despite the current economic trouble.

Year to date net absorption numbers were at 186,478 SF, with the bulk of deals being signed in Q2 2020. Vacancy now sits at 5.1%, which remains near the record low in 2006-2007, despite the vast amount of construction during this development cycle.  Average asking lease rates increased in all product types, with the largest jump in warehouse/distribution space to $0.70 PSF NNN.  A new supply of inventory totaling 1.9 million SF is scheduled to be delivered over the next two quarters with over 83% pre-leased. In addition, the future pipeline of planned projects totals over 2.6 million SF.

Recent lease comps for the Henderson Submarket include: the 100,405 SF lease at Matter Park @ West Henderson with Creative Technology Group; the 66,700 SF lease to Plus Studios at Black Mountain Industrial Park; and the 86,880 SF lease to T3 Expo at AirParc Industrial.

New projects currently under construction and planned include: the second phase of Panattoni’s South15 Airport Center with three buildings totaling 862,040; Matter Park @ West Henderson Phase II plan of three buildings totaling 182,820 SF; Odyssey Real Estate’s condo sale project totaling 65,590 SF; and Western RealCo and Brass Capital’s  338,048 SF project of two warehouse distribution buildings to name a few.

With its diverse owner and tenant mix, which is less reliant on the industries likely to be most impacted by our current economic turmoil (convention and hospitality), the Henderson Submarket should be able to weather the storm and continue its positive trajectory through the next several quarters.