National commercial real estate trends continue to reflect weakness. Housingwire.com (Gaffney, 8/26/10) notes that 88 percent of respondents to a development survey stated that development was almost non-existent in their markets. Such is the case here in Las Vegas as well and while there is still some construction in office, retail and industrial, there is almost no planned product and no planned product that we are aware of in industrial.
Similarly, on REIT.com, Green Street Advisors analyst Steven Frankel also notes weakness in the industrial sector with "subdued net absorption." Rents are also expected to remain weak. A rebound may be a way's off. This is also the sentiment of many in the Las Vegas market. While Las Vegas' industrial market is very small compared to coastal cities, it is an important component of our economy and is very connected to the hotel & casino sector, since that is the key driver of activity in the region and since industrial space is often absorbed or vacated depending on the level of convention activity, slot machine manufacturing, food storage and whatever else you can think of. Until we see a stronger rebound in the hotel sector, we can expect some muted responses in net absorption.
Nevertheless, there has been leasing activity, often to lower occupancy costs by existing firms. There have also been investor deals. As always, as long as things are priced right, buildings can still sell. It has just been difficult to obtain a meeting of the minds between buyers and sellers, whose expectations about the future of the sector has been a wide chasm.
Overall, tenants are the ones who have been finding deals, sometimes within sublease space and have been able to drop their costs by substantial amounts by either finding cheaper space or smaller space that better suits the level of their current business activity.