Dan Adamson / ROI Commercial Real Estate
As of Q2 2020, the Southwest Submarket was comprised of 755 retail buildings consisting of just over 10.3 million SF, representing 11.5% of the overall Las Vegas retail market, consisting of 2.5 million SF of power centers, 2.7 million SF of neighborhood centers, 1.2 million SF of strip centers, and 3.7 million SF of general retail. The overall vacancy rate was increased from 4.5% in Q2 2019 to 7.5% in Q2 2020 (compared to 6.3% valley-wide). Net absorption for Q2 2020 is 90,000 SF while the entire retail market was 58,000 SF. Finally, the Southwest Submarket has the sixth lowest vacancy of the 10 submarkets surveyed, which range from 3.4% in the Northwest to 10.0% in Central East.
The average lease rate was $2.18 PSF NNN in Q2 2020, up 7 cents from last year, which represents a 3.4% increase 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. The forecast with COVID-19 is very uncertain and retail trends have accelerated drastically. Expect more vacancy.
Sales activity consisted of 32 transactions for the past 12 months down substantially from 54 sales in the prior 12 months. Further, sales had an average price PSF and cap rate of $333 PSF and 6.4% respectively. In 2019 those numbers were $344 and 6.6% respectively.
There are 277,078 SF under construction in the Southwest Submarket. This is a 67% increase over 2Q 2019. The Southwest is clearly a hot market. Looking forward, Dapper Companies’ “The Bend” is the largest center planned at 157,000 SF. We hear the project might be phased with Galaxy Theater coming later than previously expected due to COVID-19.
In summary, Las Vegas will continue to see demand for a COVID-sensitive retail environments that emphasize less touch and more drive-through experiences. Las Vegas residents will need to get more comfortable in getting out and packing into entertainment venues and casinos before we fully recover. Vaccinations and cures for COVID are obviously important. New retail market realities, such as supermarkets and other retailers, that sell merchandise in virtually every retail category and competition from large internet-based companies will limit the expansion potential of big box and junior anchor tenants moving forward.