Office vacancies rise amid housing market downturn

Las Vegas Foreclosure & Investor News

BY TONY ILLIA

Southern Nevada office vacancies reached 12.24 percent in the third quarter amid a housing market downturn, reports Applied Analysis, a Las Vegas-based economic research firm. The Las Vegas Valley had 44.1 million square feet of office space at the end of September, including 766,000 square feet of new completions, such as the $107 million, 284,000-square-foot Molasky Corporate Center II at 100 City Parkway and the $35 million, 154,000-square-foot The Pavilion at 10801 W. Charleston Blvd. Despite two million square feet worth of absorption year-to-date, vacancies still increased by 2.2 percent in the third quarter over last year.

Softened residential conditions helped slacken office demand in the Las Vegas Valley. New home foreclosures, for example, reached 3,147 in the second quarter, for a 792-percent year-to-year increase, reports foreclosure.com, with another 4,535 foreclosures actively underway. A record 24,218 homes were listed for sale in September, which is 16.3 percent more than in 2006, reports the Greater Las Vegas Association of Realtors.

"The rise of vacancies can be partly attributed to mortgage, title and construction companies tied to the homebuilding industry," said Brian Gordon, an Applied Analysis principal. "There is also a significant amount of space coming online, much of which was started 12 to 15 months ago when market conditions were much different."

Three million square feet of new space was under construction in the third quarter, including the Marnell Airport Center, Phase I, at Russell Road and Spencer Street.

Burke & Associates is the contractor for the $7.5 million, 81,616-square-foot initial phase consisting of three, three-story Class-A office buildings. Marnell Properties' 14-acre development is expected to open by May 2008.

Class-A space had the lowest vacancy rate of all office products at 8 percent in the third quarter as well as the highest rents at $2.86 per square foot. Speculative space, by contrast, had the highest vacancy at 13.9 percent, while Class C product recorded the lowest rents at $1.90 per square foot. The valley's overall asking rent was $2.36 per square foot in the third quarter, or one cent higher than the previous quarter.

"While rent growth has declined for six consecutive quarters, pricing remains somewhat elevated," Gordon said. "The latest market conditions have office building owners adjusting their pro-formas as longer lease-up periods, incentives and above-average tenant improvement allowances are being considered for new supply entering the market."

PROJECTS

Ninyo & Moore performed geotechnical and environmental assessments for the proposed $406 million, 70-acre Veterans Affairs Medical Center at Interstate-215 and Pecos Road in North Las Vegas. The six-story, 720,000-square-foot facility will contain a 90-bed hospital, a 120-bed nursing home, an outpatient clinic, and office space. The project is scheduled to finish in 2009.

Territory Inc. of Las Vegas is developing 150,000 square feet of retail space inside the $350 million, 360-unit Newpark mixed-use, master-plan community at Kimball Junction and I-80 in Park City, Utah. Plans call for entertainment, restaurant and specialty shops from 1,000 square feet to 20,000 square feet in size along a pedestrian friendly main street with multiple plazas. The retail portion, which will be anchored by Best Buy, will break ground early next year and finish by mid-2009. Staubach Retail's Ruth Jolley in the firm's Salt Lake City office is handling leasing.

Breslin Builders completed the $93 million, 168-unit Newport Lofts at Casino Center Drive and Hoover Avenue in downtown Las Vegas. Developed by Seegmiller Partners and Sam Cherry, the 23-story glass-and-concrete tower features residences from 900 square feet to 2,900 square feet along with a rooftop pool and amenities deck. The 335-foot-tall high-rise was designed by WPH Architecture.

Crisci Builders recently completed the $8 million, 56,000-square-foot Cartier Business Center at 4910 E. Cartier Ave. in North Las Vegas for Fratelli Development. The 10-building flex/warehouse complex is 70 percent occupied by such tenants as Cutting Edge Cabinets, Sheedy Drayage Co. and Denko Drywall Co.

Crisci also finished the new $443,000 Service 1st Bank at 8965 S. Eastern Ave. The four-month, 4,103-square-foot project was designed by JMA.

Clark County broke ground on a new $5.1 million fire station inside the 3,500-acre Mountain's Edge master-planned community in the southwest valley. Designed by BJG Architecture + Engineering, the five-acre, 10,500-square-foot facility will open in mid-2008.

MILLION DOLLAR DEALS

Margal Investments LLC bought 10,000 square feet of industrial space inside the Carey Industrial Park at 2652 Abels Lane for $1.068 million, or $106.80 per square foot, from Carey Industrial Park LLC. Albright Callister's Cathy Baca represented the seller, and Lee & Associates' Shawn Barashy represented the buyer.

ETND, LLC bought 50,000 square feet of industrial space inside the Cheyenne Industrial Center at 3135 Marco St. for $4.28 million, or $85.60 per square foot, from CIC Development. Grubb & Ellis' Xavier Wasiak represented the seller, and Lee & Associates' Shawn Barashy represented the buyer.

Armstrong Development Properties bought 1.6 acres of raw land at the southeast corner of U.S. Highway 95 and Buchanan Boulevard for $1.23 million, or $768,750 per acre, from the E.L. and Edna R Jarrad Trust. NAI Horizon's Dave Johnson and Phillip Baca represented the buyer.