The Las Vegas Valley’s industrial real estate market is experiencing its highest vacancy rate in 11 years, reaching 9.5% in the first quarter, according to a report by CBRE Group Inc. This increase follows a period of significant construction and financial activity between 2021 and 2023, spurred by low interest rates during the pandemic. The surge in new developments led to an oversupply of industrial space that coincided with a slowdown in demand.
In 2024, only 3.2 million square feet of industrial space were absorbed, a sharp decline from the previous annual average of 10 million square feet. The construction pipeline has been decreasing since its peak in the third quarter of 2023. At the end of the first quarter, about 25% of the newly delivered 46 million square feet of industrial projects remained unoccupied.
Despite the high vacancy rates, local market experts remain optimistic. Garrett Toft, vice chairman for CBRE in Las Vegas, believes that the current vacancy rate likely represents a market peak. With a halt in new construction and a steady, albeit slower, rate of space absorption, the vacancy rate is expected to decline in the upcoming quarters. He highlighted that tenant demand and lease activity are on the rise, which should help stabilize the market.
Submarkets like North Las Vegas and Henderson are experiencing higher supply and vacancy rates. However, an increase in demand is anticipated, which could stabilize these areas as well. The report indicates that the market has shifted to be more tenant-friendly, with landlords offering more competitive and flexible terms. This environment could lead to more advantageous pricing and opportunities for tenants and buyers. The overall expectation is that vacancy rates might rise slightly above 10% in the second quarter before gradually decreasing by year-end, supported by the slowdown in new construction and ongoing space absorption.