Applied Analysis, a locally based business research and advisory firm, says 508,000 sf was completed during the quarter while absorption was 470,000 sf, taking the full-year totals to 3.4 million sf of new construction deliveries and 2.4 million sf of absorption, a one-million-sf miss that pushed vacancy to 12.4% from 10.8% at the start of the year.

A joint report by Colliers International and Restrepo Consulting Group LLC reports finds 1.1 million sf of space was delivered in the fourth quarter and absorption was half the total, pushing the year-end numbers to 3.8 million sf of new construction deliveries against 2.3 million sf of absorption, a 1.5-million-sf miss that pushed vacancy to 12.2% from 9.3% at the start of the year.

Finally, CB Richard Ellis reports that three million sf came online in the Vegas valley in 2007 and, while gross absorption set a new record at four million sf, net absorption was one million sf, pushing overall vacancy to 15.28%, "a rate that the Las Vegas Market has not seen since the fourth quarter of 2001," according to the report.

"The underlying fundamentals of the Las Vegas economy remain strong; however, the combination of the subprime crisis and overbuilding of office properties has created the perfect storm, causing substantial market softening," says Craig Shute, CBRE managing director in Vegas.

Looking forward, the three reports estimate that between 1.5 million sf and three million sf is under construction and scheduled to deliver in the next 12 months, which if the demand side remains behind will push vacancy even higher. That having been said, Applied Analysis and CBRE predict the malaise should not last beyond 2009.

CBRE reports that despite the disturbing trend of office saturation that we have been seeing the past year, a report from the National Association of Realtors predicts "employment related to office-based occupations will rise by 6.5% nationally through 2009 and grow nearly the same amount from 2010-2014."

Applied Analysis Principal Brian Gordon says that while the Las Vegas office market is likely to experience volatility in the near-term, longer-run projections look brighter. "Beyond 2009, population and employment growth projections will likely result in increasing demand for office space causing a more balanced environment to prevail," he says.

The Restrepo-Colliers report states that "vacancy levels can be expected to remain high during the next several quarters."

With regard to rents, all three are reporting an increase in asking rents since the end of 2006. Applied Analysis says the valley-wide average stood at $2.33 per sf per month at year-end, up from $2.28 at the start of the year. The Henderson submarket had the highest average asking rate at $2.46 and the average class A asking rate was $2.79 per sf, according to the report.

The Restrepo-Colliers report pegged the average monthly asking rent in the fourth quarter at $2.51 per sf (full service gross), up from $2.29 at the start of the year. The CBRE report estimates the overall average asking rate at $2.56 and the class A rate at $2.79.

"Tenant improvement allowances on newly-constructed product will be a key pricing factor for many potential tenants and landlords," Gordon concludes. "Typical build-outs have been running in excess of the $40 to $55 per sf allowances currently being offered. With excess availability in many areas, second-generation space may make financial decisions easier for tenants looking to move or expand their operations."