(To read more on the industrial market, click here.)

LAS VEGAS-A mid-year market report on the region’s industrial market finds everything humming along nicely. The market added some three million sf through the first half of the year and has already absorbed 2.3 million sf, keeping overall vacancy in the low single digits, according to the latest data from Applied Analysis, a locally based business advisory known for its analysis of the commercial real estate and gaming industries.

In the near-term, the market should continue to perform, with increasing demand largely keeping pace with a surge of new construction. Further out, the forecast isn’t as pretty, not because vacancy is going to rise but because there will be no vacancy, mostly because the market is running out of industrial zoned land for warehouse and distribution space priced such that achievable rents can provide a reasonable return on investment, says Applied Analysis principal Jeremy Aguero.

“Despite the modest rise in vacancies during the quarter, the industrial market remains near optimal occupancy levels with longer-run land availability remaining the harbinger of the market’s expansion beyond 2010,” he says. “The amount of industrially zoned land at financially feasible prices remains limited within the urban valley and that has us concerned in the industrial sector; it is possible the current wave of construction could be the last of its size.”

Despite land pricing and construction costs putting several projects on hold, Aguero says many owners have thus far been able to solve the problem by shifting toward for-sale freestanding buildings, creating joint venture arrangements and subdividing of parcels, allowing stakeholders “to make financial sense of projects in an infeasible environment.”

As of June 30, the industrial market consisted of 85.9 million sf in 2,705 buildings with unoccupied space totaling 3.4 million sf, for a vacancy rate of 4%, up temporarily from a record-low 3.2% at the end of the first quarter. Despite three million sf already have been added during the first six months of the year–1.6 million sf in the second quarter, by itself is more than half of last year’s total–approximately five million sf of industrial space is under construction. An additional 6.6 million sf is planned but has yet to commence construction, according to the report.

Absorption was 929,000 sf in the second quarter, down from 1.4 million sf during the first three months of the year and 1.9 million sf in the second quarter of 2005. The overall vacancy rate of 4% at the end of the second quarter is 40 basis points lower than the same time last year.

By type, R&D space had the lowest vacancy at 1% and flex space had the highest at 6%. By market, unincorporated Clark County has the lowest vacancy at 3.3% and the City of North Las Vegas had the highest at 5.6%. Vacancy in the City of Las Vegas stood at 4.7% at mid-year and in the City of Henderson it was 3.9%. All but the City of Henderson saw vacancy fall about 40 basis points, while Henderson’s increased by 100 basis points.

Correspondingly, asking rates in each of the markets but Henderson are up from this time last year. The biggest increase occurred in the City of Las Vegas, were no new construction was delivered. The average asking rent there rose by more than 30% to $0.81 per sf per month. In unincorporated Clark County, the average asking rate rose by about 12.7% to $0.80 per sf per month while the City of North Las Vegas’ average asking rent is up $0.02 to $0.47 per sf per month. In Henderson, the average asking rent fell to $0.62 from $0.70 this time last year.

Construction completions during the second quarter included more than 393,000 sf in the Golden Triangle Industrial Park in North Las Vegas; multiple buildings in EJM Development’s Arrowhead Commerce Center in the east portion of the valley; several freestanding buildings in the Coleman Air Park in the North Las Vegas area; and Shadow Mountain Business Park in North Las Vegas along Pecos Road.

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