For Northern Nevada
The Reno Industrial market finished the quarter with strong market fundamentals, posting the twelfth consecutive quarter of positive net absorption. Record low vacancy and availability rates have driven tenants to prelease under construction and planned projects. Average asking lease rates increased 50 percent year-over-year, ending the quarter the record high at $0.87 monthly, per SF, NNN. On the supply side, 699,286 SF of product was delivered to the market with 5.7 million SF currently under construction.
Vacancy and availability held steady in Q3 2022. The vacancy rate remained the same quarter-over-quarter at 0.5 percent. The availability rate followed suit and finished the quarter at 1.3 percent. With the lack of tenant ready product in the market, market fundamentals remained stationary in Q3 2022.
The Reno market closed out the Q3 quarter with a total of 743,045 SF of net absorption, maintaining the market’s healthy leasing transactions and industrial sales activity in the Reno market remained active in Q3 2022. The Reno construction pipeline had a variety of projects totaling over 5.7 million SF under construction and is not expected to slow down with over 20 million SF of planned projects in the pipeline. However, the market continues to experience prolonged and constantly changing completion dates due to supply chain constraints. Despite prolonged construction, demand for under construction properties will continue to remain strong in the coming quarters.
For Southern Nevada
Tight vacancy, strong preleasing, continued rent growth, and high tenant demand were the central themes of the industrial market during Q3 2022. Net absorption remained positive, with 427,660 SF for Q3 2022, bringing the year-to-date total to 5.6 million SF. While Q3 net absorption was low compared to prior quarters, it was limited due to the fact there was only 558,692 SF delivered in the quarter, representing a 78 percent prelease rate.
The development pipeline increased 20.1 percent from last quarter, and nearly half of the 16.3 million SF of space under construction during the quarter was preleased, another indication of solid tenant demand. With such a large amount of space being built, the industrial inventory base will expand by about 10 percent in the next 12 to 18 months. The overall vacancy rate showed no significant change and increased only slightly quarter-over-quarter to 1.0 percent.
Continued low vacancy rates are holding average asking lease rates at unprecedented highs. The average asking lease rate continued to climb during the third quarter to yet a new record high to $1.19 per SF NNN, a 7.2 percent increase from last quarter and a 32.2 percent year-over-year increase. Industrial leasing showed no signs of slowing, but strong tenant demand will need to continue in order to absorb the future supply coming on the market.