Sun Archives
- Commercial developers hope there’s nowhere to go but up (10-9-2009)
- Office vacancy rate could hit 30 percent in parts of valley (7-17-2009)
- Worst in nation: Las Vegas commercial properties in distress (6-19-2009)
- Vacancies don’t deter longtime LV developer (6-12-2009)
- Office market depressing land prices in valley (6-12-2009)
- Office vacancies climb as rents head south, analysts say (4-17-2009)
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The vacancy rate for high-end office space jumped to 25 percent in the third quarter, prompting landlords to steeply cut rents.
Applied Analysis reported the already record-high vacancy rate for office space increased, going from 22 percent in the second quarter to 22.7 percent in the third quarter.
In 2010 it expects the vacancy rate to triple in size from its low of 8.1 percent in 2005’s third quarter, which is not good news for office-building owners.
The high-end Class A space has eclipsed the low-end Class C space, whose vacancy rate stood at 13.9 percent in the third quarter, the firm noted.
Rents for that low-end space was almost steady, falling only 2 cents in the third quarter to $1.79 per square foot. But the Class A space saw a dramatic drop from $2.81 per square foot in the second quarter to $2.26 in the third quarter.
That could worsen because the office market expanded by 214,600 square feet in the third quarter. More than 900,000 square feet has been added this year, analysts said.
Applied Analysis Project Manager Jake Joyce said it’s likely that office development will cease by mid-2010 because of the state of the market. And Applied Analysis Principal Brian Gordon said the high vacancy rates may remain for another five years.
Restrepo Consulting Group Principal John Restrepo echoed the bad news in his forecast, saying the vacancy rates will rise well into 2010 because of the weak job market.
“The good news is that construction continues to taper off, giving the market a chance to stabilize,” Restrepo said. “But we still don’t expect the office market to see signs of a sustained recovery until some time in late 2010 or early 2011 at best.”
Restrepo said the vacancy rate is actually higher than its report of 21.7 percent. When adding in sublease space, it grows to 23 percent.
Grubb & Ellis reported the southeast valley had the highest vacancy rate at 28.2 percent, followed by the northwest valley at 25.3 percent, north valley at 24.1 percent and southwest valley at 22.1 percent. Downtown Las Vegas had a 14 percent vacancy rate.
CB Richard Ellis reported the southeast and southwest valleys had the highest amount of vacant space at 1.4 million and 1.3 million square feet, respectively.
Of new leases in the third quarter, the firm said they tended to be for 12 to 24 months only. Tenants are reluctant to sign long-term leases because of uncertainties with the economy, the firm said.
A recent trend has been for tenants in the later part of their leases to employ a “blend and extend” strategy to take advantage of the soft market, said Bret Davis of CB Richard Ellis. That means tenants extend their existing lease at a reduced rate, he said.
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