NORTHWEST SUBMARKET SPONSORED BY:

Jim Hill / ROI Commercial Real Estate

As of Q2 2020, the Northwest (NW) Submarket was comprised of 424 retail buildings consisting of 7.1 million SF, made up of 1.3 million SF of power centers, 3.4 million SF of neighborhood centers, 400k SF of strip centers, and 1.9 million SF of general retail.  The NW represents 6% of the overall Las Vegas market of 117 million SF.  The overall vacancy rate was 3.4% percent as of Q2 2020, up from 2.6% last year, and compared to 6.9% valley-wide.  Further, the NW has the lowest vacancy of the 10 retail submarkets surveyed, which range from 3.4% to 10%, and can be attributed to this submarket’s above average net absorption of 115k SF.

The average lease rate was $2.22 PSF NNN as of Q2 2020, an increase of $0.10 PSF from Q2 2019.  Lease concessions, such as abated rent and tenant improvement allowances, are common and vary based on strength of tenant and overall lease terms with landlords considering longer periods of abated rent to move deals forward in the face of uncertainty and tenant hesitation during COVID-19. Notable lease transactions include: Humana leased 7,000 SF within Cheyenne Commons; Planet Fitness leased 18,000 SF within Deer Springs Villages; Skecher’s leased 11,500 SF within Centennial Center.

Sales activity consisted of 23 sale transactions, a 30% decrease from the previous 12 months.  Sale prices ranged from $218,700 to $26,000,000, with a median sale price of $1,800,000.  Further, sales had an average price PSF and cap rate of $352 PSF and 5.6% respectively. Notable transactions include the purchase of a 28,000 SF vacant car dealership on 12.45 acres formerly occupied by Auto Buy Smart, which was purchased by the Howard A Keys Trust (DBA Keyes Motors) for $26 million in February 2020.

12,700 SF was under construction with 141,000 SF delivered over the previous 12 months, representing a year-over-year decrease of 36%, and another 140,000 SF is proposed over the next 8 quarters.

In summary, Las Vegas continues to have one of the fastest expanding population bases among major metropolitan areas. However, COVID-19 has caused considerable economic damage and uncertainty. Las Vegas is a destination city, and as long as visitation and travel is negatively impacted by the pandemic and decreased consumer spending, the local economy will suffer. The Northwest Submarket remains one of the fastest growing and desirable trade areas in the Las Vegas Valley due to the above average demographics of its residents. While construction and sales activity have slowed over the past 12 months, retail rents have increased by 4.5% in the same period in the NW.  As vacancies are projected to rise, both brokers and landlords will need to be creative in the coming months to either re-purpose or backfill spaces vacated by both mom & pop and national tenants unable to pay rent, by considering non-traditional retail uses such as drive/pick-up facilities and fulfillment centers or by reducing shop space to make room for potential pad development with drive thrus.  The effects from the coronavirus pandemic will continue to have a negative economic impact on the Las Vegas economy and the Northwest Submarket in the short term.  However, once either a vaccine or effective treatment is produced, Las Vegas, which has proven to be a resilient community in the past, should be well positioned for a sustained recovery.

Mike Tabeek, SIOR, CCIM / Newmark Knight Frank

The Northwest Submarket is encompassed by the 215 Beltway to the west, east along US-95 and Rancho Dr., Charleston to the south, and everything north in between those boundaries. As of Q2 2020, this market consists of approximately 6,074,251 SF of office space, which represents 15% of the total office space tracked in the Las Vegas Valley. Q2 shows an 11.9% vacancy rate in this submarket, down from 13.4% this time last year.

Leasing rates in the Northwest currently average $2.05 PSF FSG (full service gross), and rates have slightly increased since last year. While the office market was strong finishing 2019 and leading into 2020, the brakes were quickly pumped when COVID-19 hit.  It will only be a matter of time before things start moving again.  There are several projects planned in the valley and Las Vegas needs new office product.

Significant leases include: Rubin Brown signed a full floor lease at the Pavilion for just over 25,000 SF, and Sportradar, a new tenant to the market, also signed a lease for just under 15,000 SF at City Center West.

Office sales slowed in the market versus this time last year, and we have seen two properties trade: 1551 Hillshire Dr. sold for $18,300,000 ($259 PSF), and 2450 Fire Mesa sold for $20,900,000 ($378 PSF).

The bright spot in this submarket, inspired by the success of Two Summerlin, is that Howard Hughes has their next Class A office building in Downtown Summerlin planned to break ground in late 2020 to early 2021.  The 10-floor building will be located just south of Las Vegas Ballpark, home to the Aviators, providing exceptional amenities and views for the tenants.  With the success of the two office buildings that Howard Hughes has built so far, this 10-story office building will continue to feed the demand for true Class A buildings in the Summerlin area.