Weathering the
Storm Las Vegas, NV John Matt Stater
The second quarter of 2020 was the “business closure” quarter, and only the industrial market bucked the expected trend of weaker commercial real estate numbers.
INDUSTRIAL HISTORICAL VACANCY RATES AND ASKING LEASE RATES
The second quarter of 2020 produced over 2 million square feet of industrial net absorption. Warehouse/ distribution product posted all of the Valley’s positive net absorption in the second quarter of 2020. Other industrial product types, which rely more heavily on small businesses, suffered negative net absorption. While it is likely that warehouse/distribution demand will remain relatively strong through the remainder of 2020, it is unknown how quickly small businesses will recover. By the end of 2020, we may see an overall positive industrial picture that nevertheless obscures the challenges faced by many landlords of nonwarehouse/distribution properties in the Valley. After a robust first quarter, pandemic woes sent land sales activity much lower in the second quarter of 2020. While it is unlikely that this slump in land sales was directly related to the existence of COVID-19, it is probable that the uncertain business climate created by the business closures enacted to stem the spread of the virus put land investors on the sidelines in the second quarter. Land sales may not fare better in the third quarter, but signs of solid economic recovery in the third quarter could put investors back in the market by the end of 2020.
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// JULY 2020 //
Southern Nevada’s office market has, so far, showed surprising resilience in the face of the business closures enacted to stem the spread of COVID-19. While approximately 10,000 square feet of net absorption is nothing to brag about, any positive net absorption in the face of the massive job losses experienced over the past two months is remarkable. Anecdotal evidence suggests that most office tenants continued to pay their rent over the past few months, but the eviction moratorium imposed until July makes it difficult to know how vulnerable the market is to future vacancies. We think the office market will continue to be challenged by the job losses already experienced and the uncertainty regarding evictions, utilization of office space post-pandemic and whatever other upheavals 2020 has in store for us.
