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Press Release

Office, Retail Markets Show Signs of Growth in Fourth Quarter

LAS VEGAS (January 21, 2013) – With vacancy decreasing in the office and retail sectors, Colliers International – Las Vegas’ fourth quarterly market report of 2012 points to signs of slow and steady growth in 2013, despite increases in vacancy in the industrial and medical office industries.

Compiled by John Stater, research director for Colliers International – Las Vegas, the report cites continued positive performance, a decline in vacancy and a continued improvement in taxable sales figures as positive indicators for the retail market. Southern Nevada’s retail vacancy dropped to 10 percent in the fourth quarter, representing a year-over-year decrease of 1.4 percentage points.

“The retail recovery we have been waiting for is finally here, and while it might not be stellar, it is real and appears to have legs,” said Stater.

Despite these economic increases, experts from Colliers International anticipate slow growth in Southern Nevada in 2013, citing vacancy increases in the industrial and medical office sectors. Medical office absorption decreased 54,018 square feet from last year, and industrial vacancy decreased by 364,552 square feet from last year.

“We think we will continue to see the medical office market bounce along the bottom in 2013 while medical office users survey the new medical landscape and prepare for the future,” said Stater. “We think 2013 holds the possibility of slow growth for the industrial market, but it is more likely that 2013 will be another difficult year for the industrial market, with as many negatives as positives.”

Year-over-year, Southern Nevada’s hotel industry has continued its path toward recovery, with 2012 being no exception. Occupancy increased almost 2 percentage points, while the average daily rate (ADR) increased 3.7 percent from 2011. Visitor volume in Clark County totaled more than 33.5 million visitors through the first 10 months of 2012. This figure is less than the same time period in 2011, but does not include what was expected to be a strong November and December.

Sales activity involving hotels remained weak in the fourth quarter, with the majority of sales involving full service properties without casinos on the Strip and full service properties with casinos off the Strip. Gaming revenue increased in 2012, with the revenue per available room (RevPAR) increasing 4.6 percentage points from 2011.

“The local hospitality industry is recovering. That’s the good news. The bad news is that Southern Nevada does not entirely control its own destiny, relying as it does on strong national and international economies producing enough people with disposable income to make the pilgrimage to Sin City and deposit their cash in our coffers,” said Stater.

Other key findings of the report, broken down by market segment, include:


Industrial vacancy now stands at 15 percent. This is 0.2 points higher than one quarter ago and 0.3 points higher than one year ago.

The industrial average asking rent now stands at $0.48 per square foot on a triple-net basis. This is the same as one quarter ago and a $0.03 decrease from one year ago.

Industrial net absorption was 169,641 square feet this quarter. This is a 340,030-square-foot decrease from one quarter ago, and a 364,552-square-foot decrease from one year ago.

There were zero square feet of industrial completions this quarter. This is as it was one quarter ago and a 131,154-square-foot decrease from one year ago.

Weakness in the construction industry overshadowed job growth in other industrial sectors this year.

There are many companies that want to do business in Southern Nevada, but find themselves in the position of either needing to construct their own buildings due to a lack of suitable supply, or find the low construction costs and land costs too enticing to pass up.

Much of the activity in the market is clearly lateral in nature, consisting of tenants looking for less space, better-located space, or cheaper space, or some combination of the three.

Texas-based buyers were more conspicuous in the fourth quarter than in previous quarters, contributing $24.1 million of the total investment sales volume this quarter.

The recent collapse in demand for warehouse/distribution space is impossible to ignore, and when coupled with the significant number of warehouse/distribution build-to-suit properties floating about, points to a fundamental mismatch in available inventory and current demand.

“The industrial market is engaged in a very slow and uneven recovery – a recovery marked by a difficult transition from an infrastructure designed to service the construction sector to one that must serve the transportation and warehousing sector,” Stater said.


Office vacancy now stands at 22.8 percent. This is a 0.7-point decrease from one quarter ago and a 1.2-point decrease from one year ago.

The office average asking rent now stands at $1.88 per square foot on a full service gross basis. This is a $0.02 decrease from one quarter ago and a $0.07 decrease from one year ago.

Office net absorption was 265,336 square feet this quarter. This is a 155,619-square-foot increase from one quarter ago and a 369,044-square-foot increase from one year ago.

There were zero square feet of office space completed this quarter. This is a 67,692-square-foot decrease from one quarter ago and a 45,579-square-foot decrease from one year ago.

While three quarters of decreasing office vacancy could be the beginning of a trend, employment growth in the office sector continues to be unimpressive, with financial services and professional and business services, the sectors most important to the professional office market, continuing to underwhelm.

Moving forward, newer, more efficient office space in the Southwest will attract a considerable share of future demand, while older submarkets will continue to decline.

Class A office projects will have to continue to fight for new tenants in 2013 and will need to focus on retention of existing tenants as well.

The impact of higher capital gains taxes on property sales is the big question for 2013. In general, it should depress outright sales of property, but make exchanges significantly more attractive.

“Last quarter, we said that Southern Nevada’s office market was neutral. This quarter, it may have finally gotten into gear,” Stater said. “By and large, the local economy should see continued slow growth in 2013, and we believe the office market will follow suit. If the economy does turn sour, though, expect continued difficulties for the office market as well.”


Retail vacancy now stands at 10.0 percent. This is a 0.2-point decrease from one quarter ago and a 1.4-point decrease from one year ago.

The retail average asking rent now stands at $1.36 per square foot on a triple-net basis. This is a $0.01 decrease from one quarter ago and a $0.02 decrease from one year ago.

Retail net absorption was 117,731 square feet this quarter. This is a 263,706-square-foot decrease from one quarter ago and a 1,556-square-foot increase from one year ago.

There were no retail completions this quarter. This is as it was one quarter ago and a 30,500-square-foot decrease from one year ago.

The fourth quarter of 2012 saw another quarter of positive performance for Southern Nevada’s retail market, the sixth quarter in a row and a sure sign that Las Vegas has some life left in it.

Retail vacancy in Southern Nevada has been on the decline for six quarters, indicating a definite trend and a welcome departure from the previous three years.

Taxables sales still have not rebounded to pre-recession levels, but the steady improvement in taxable sales is likely a factor in the recent improvements in retail net absorption, as more retail businesses are finding a way to survive.

Retail sales volume, for both owner/user space and investments, has been on a soft decline over the past year, and price per square foot of sales has also been dropping. Much of the available distressed product is distressed because it was poorly designed and/or poorly located, and this product is not only dragging down values, but is also gradually losing its audience.

Southern Nevada currently has 1.16 million square feet of big-box space available in the marketplace. Filling big-box space could be a slow process, especially given the current trend in big-box retailing to downsize their stores in the face of “showrooming” by customers who browse in brick-and-mortal retail stores, but finalize their purchase online.

“As retail continues to bifurcate into high-end and low-end, high-density submarkets should reap the benefit. Affluent submarkets will attract high-end retail, of course, but high-end retail will not likely occupy as much retail space, in terms of raw-square-footage, as low-end retail,” said Stater.


Hotel occupancy in Clark County averaged 88.8 percent in 2012, a 1.9-point increase over 2011, and a 5.3-point increase over 2010; just one of several measures of the hospitality industry that improved in 2012 over past years and a clear sign that Southern Nevada’s tourism industry is in recovery mode.

Clark County’s ADR was $108.99 in 2012, a 3.7 percent increase over 2011, when ADR was $104.97, and a 12.9 percent increase over 2010, when ADR was $94.94.

Visitor volume almost hit a new record in 2011, and with a strong November and December, 2012 might beat that record. Clark County visitor volume totaled 33,584,000 visitors through the first ten months of 2012, approximately 62,000 fewer visitors than arrived in the first ten months of 2011.

Gaming revenue is also trending up for Clark County and the Las Vegas Strip. RevPAR in 2012 is up by 4.6 percent over 2011, and up 17.1 percent compared to 2010.

While leisure and hospitality jobs were on the rise through the first half of 2012, they have fallen off since. Between November 2011 and November 2012, the leisure and hospitality sector only added 800 jobs.

Year-to-date in 2012, sales volume has been weak, with only 2,309 units selling at approximately $49,000 per unit, for a total sales volume of $114MM, compared to $2,986MM of sales volume in the first three quarters of 2011 and $853MM of sales volume in 2010.

Most sales have been in full service properties without casinos on the Strip and full service properties with casinos off the Strip.

“We do believe that the local hospitality market will continue to improve in 2013, and that this improvement and the impact of ‘fiscal cliff’ tax increases on capital gains has the potential to drive more investment dollars into Southern Nevada’s hotels,” said Stater.

Medical Office

Medical office vacancy now stands at 21.1 percent. This is a 1.1-point increase from one quarter ago and a 1.2-point increase from one year ago.

The office average asking rent now stands at $2.11 per square foot on a full service gross basis. This is a $0.07 decrease from one quarter ago and a $0.19 decrease from one year ago.

Medical office net absorption was 59,066 square feet this quarter. This is a 128,151-square-foot decrease from one quarter ago and a 54,018-square-foot decrease from one year ago.

There were no new medical office completions this quarter. This is even with one quarter ago and is a 20,000-square-foot decrease from one year ago.

Over the past two quarters, job growth has wavered, and Southern Nevada now has 18,500 health care workers outside of ambulatory services and hospitals.

Strong employment growth over the past year should have sent vacancy rates lower, but as mentioned, changes in the way healthcare is delivered are disrupting the normal link between jobs and occupied real estate where medical office space is concerned.

Medical office sales were weak in 2012, with a total of 179,000 square feet selling at an average price of $139.78 per square foot.

Doctors, insurers and patients are all going through a slow discovery process of just what the Affordable Care Act means to them, and doctors and insurers are especially trying to come to grips with what these government-mandated changes will mean to their business models.

“From Wal-Mart’s foray into small pharmacies on medical campuses to health care in Targets, more and more medical office dollars are going to flow into non-medical real estate, putting the crunch on landlords already dealing with consolidations and downsizing among physicians,” said Stater.


According to statistics provided by REIS, multi-family vacancy in Southern Nevada decreased in the third quarter of 2012, the most recent quarter of available data, continuing a ten-quarter trend in declining vacancy.

Southern Nevada’s multi-family sector is continuing to display a path of steady recovery as demand for multi-family continues to outstrip supply, keeping landlords happy and stimulating demand for multi-family assets in the valley.

Population growth continues to be a key driver of Southern Nevada’s economy. While that growth ceased for the first time in forty years during the Great Recession, it appears to once again be on track.

Recent moves by key investors in the market are likely to keep single-family rents suppressed in the near term, and this might impact multi-family rents in 2013.

“As rents rise, folks who are lurking on the margins of the multi-family market may decide that 2013 is their last chance to find a deal,” said Stater. “Tax increases brought on by the imminent plunge over the ‘fiscal cliff’ could be a winner for multi-family investment, encouraging tax-deferred exchanges.”

About Colliers International
Colliers International is the third-largest commercial real estate services company in the world, with over 12,300 professionals operating out of more than 520 offices in 62 countries. A subsidiary of FirstService Corporation (NASDAQ: FSRV; TSX: FSV and FSV.PR.U), it focuses on accelerating success for its clients by seamlessly providing a full range of services to real estate users, owners and investors worldwide Including global corporate solutions, brokerage, property and asset management, hotel investment sales and consulting, valuation, consulting and appraisal services, mortgage banking and research. Commercial Property Executive and Multi-Housing News magazines ranked Colliers International the top U.S. real estate company. The latest annual survey by the Lipsey Company ranked Colliers International as the second-most recognized commercial real estate firm in the world.