We get many FAQs about the state of the CRE market here in Clark County. The Pandemic has obviously had a negative impact on the entire economy and many wonder how those impacts will manifest themselves here locally. The two impacts that have seemed to create the most curiosity are the challenges of brick-and-mortar retailers, the fate and future of restaurants and what will office use look like in the future.
The past 6 weeks have seemed to offer a glimmer of hope that we are making progress, receding from the peaks and getting more community members vaccinated. These factors seem to be leading us to increasing economic activity. National and State numbers also reflect these trends.
Let’s look this week at the current state of Clark County’s Office Market from data sourced through CoStar, the largest commercial real estate data base in the country. This Office Market is made up of 905 buildings and 12 million square feet of space. There is currently 157,000 square feet under construction and 805,000 square feet available, which equates to a 6.7% vacancy rate.
One of the basic strategies for fighting Covid-19 was to have as many people as possible work from home. It didn’t take long for many companies to realize that perhaps they could operate successfully with more staff at home. Some companies have already started to move to a more virtual model, depending on their relationship with their Landlord or the status of their Lease expiration. While we expect office use to change as we emerge from the Pandemic, Leases are still in place and the vast majority are binding. With that, the 6.7% vacancy rate is up a bit from last quarter and it will be interesting to see how the trend moves with average market rent/SF at $25.94. That’s up 1.6% from last quarter.
Market Sales Price/SF is $247 vs. $244, up 1.2%. from the previous quarter. 61 office properties sold for $ 35.5 million and they averaged 7.1 months on the market with an average 5.4 % discount to their asking price. That was lower than the previous quarter.
There are currently 9 office buildings FOR SALE that have 91,000 SF of space. In this regard, the CRE market is experiencing the same challenge as the residential market, low inventory of properties for sale. We also see in the past year 599,000 SF of office space was leased, which was an increase from the previous quarter.
The full impact of changes in office use by companies may not be felt for many more months. Most commercial leases are five years and we are just 12 months into this new environment. Another factor to keep top of mind is that it seems there is a hunger out in our business, social communities have a drive to be back in social contact with each other. This on top of the idea that many high performing companies recognize the value that personal interaction provides to their teams, we may see adjustments but don’t expect to see massive waves of abandoning office space.
If you would like to receive a full copy of this 13 page report, or any other insights into the Clark County Commercial Real Estate Market, please feel free to reach out to me at jim@jimwestcommercialre.com.
