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.