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.

Darren Lemmon / CBRE

The Southwest Submarket, located south of Tropicana and west of the I-15, is the 3rd largest submarket and is comprised of 163 competitive office buildings totaling more than 4.8 million SF. Through the first two quarters of 2020 net absorption for this submarket was 48,926 SF, compared to 168,599 SF for Q2 2019. All submarkets have felt the effects of COVID-19 and are off their mark for net-absorption as compared to last year’s Q2 results. The vacancy rate for Q2 2020 was approximately 9.5%, down from 10.1% at year-end 2019.

Leasing activity in the Southwest typically out-paces the rest of the market, but slightly trails the West and Southeast submarkets with 108,982 SF leased YTD. As a result of relatively strong demand and an increasing shortage of available space, the Southwest Submarket typically has some of the highest lease rates in Las Vegas. As of Q2 2020, the weighted average asking lease rate in the Southwest for Class A buildings was $3.06 PSF FSG (full service gross) and for Class B buildings was $2.50 PSF FSG.

With low vacancy rates and strong demand for Class A office space, various projects have been planned and announced for construction along the 215-Beltway. These include: UnCommons, a mixed use project with 150,000 SF of office space (Phase 1) and 90,000 SF of retail; Axiom, a two-building 160,000 SF office project; Narrative’s 102,000 SF office building; MagnuM Tower’s 5-story office development; and others. UnCommons and Axiom have already broken ground and are under construction, and Narrative and other projects are expected to be underway soon.

The strong demand for office space in the Southwest has primarily been driven by the availability of large blocks of land, accessibility to the resort corridor and McCarran International Airport, and the master-planned communities of Summerlin and Green Valley. It is seen as the perfect mid-point location between these communities and the most convenient location for office space along the 215-Beltway. The Southwest will continue to attract corporate clients and campus projects and will continue to be among the strongest demand sectors for office space in the Las Vegas market.

Jennifer Levine, CCIM / RealComm Advisors

The Southwest Submarket is comprised of approximately 44 million SF of industrial space and is generally situated west of I-15 and south of Sahara Avenue. As of Q2 2020, the Southwest Submarket experienced its first negative net absorption since the Great Recession, although very minimally at -80k SF YTD, and vacancy remains tight around 2-3%. Could this be COVID-19 related? It’s hard to say just yet as landlords have evicted few tenants since the eviction moratorium was lifted June 30, and those that were evicted tended to be in trouble before the lockdown.

Lease rates in the Southwest remain high, although tenants are seeing more abated rent and other concessions. Small flex spaces are asking $0.90-$1.10 PSF NNN for older properties and $1.20-$1.35 PSF NNN for newer construction, and dock-high midbay spaces range from $0.80-$0.99 PSF NNN. As the largest big box landlord in the Southwest with upwards of 6.1 million SF, Majestic Realty Co.’s lease rates are pretty telling for distribution spaces. Even mid-COVID, they have competing offers on available spaces and are signing leases near $0.70 PSF NNN (up from low $0.60s last year) in older projects and into the low $0.80s PSF NNN in newer developments. Other recent significant Southwest leases include Goodwill’s new 100k SF 10-year lease and Ingram Micro’s 70k SF renewal.
Asking prices for 2nd generation owner/user buildings range from $200-$240 PSF with most closing at $180-$200 PSF. Newer projects such as SanTico and Matter West @ Warm Springs tend to sell in shell condition at their asking prices, which are $175-$182 PSF as of Q2 2020.

Notable investment sales include: EastGroup purchased Brass Cap’s recently completed 196k SF Southwest Commerce Center for $130 PSF, and CapRock flipped its 2017 purchase of its 276k SF Southwest portfolio to Nicola Wealth (including Valley View Business Park, Valley View Commerce Center, and The Park at Arville).

It would be the coup of 2020 to find land of any scale in the Southwest and an even bigger feat to make that land pencil for industrial. There are a handful of 5-acre parcels asking $18-$22 PSF and a few 10 to 12-acre parcels asking in the mid-$20’s PSF.

Filter by

Get Directions

show options hide options