Las Vegas apartment demand improved considerably in the past year, but it has not been enough to stop the vacancy rate from reaching double digits for the first time since 2012. About 5,900 units delivered in the past 12 months, while only 3,300 units were absorbed, sending the vacancy rate to 10.4%. High-income households are keeping occupancy more stable at the top of the market. On average, 4- & 5-Star assets built before 2023 have a vacancy rate below 8%.
Unrelenting supply pressure is the most prominent factor driving the rising industrial vacancy rate in Las Vegas. About 8.7 million square feet of industrial space delivered in 2023, an all-time high. The pace of construction did not slow in 24Q1 as more than 2.5 million SF completed. At about 5.9%, the vacancy rate has risen since mid- 2022 but remains near the all-time low and well below the historical average of 7.1%. A glut of speculative construction in the pipeline could continue the trend of rising vacancy, which is forecasted to eclipse 6% by 2025. There is currently 16.1 million SF of space under construction market wide, about 70% of which is available for lease.
Three consecutive quarters of negative absorption and minor supply-side pressure pushed office vacancies slightly higher in the past year. The market as a whole is still relatively stable as the current vacancy rate of 10.2% remains below the historical average of 13.7%. On a submarket level, there are clear winners and losers. With weaker tenant demand and move-outs increasing, the sublet and availability rates have crept up to 0.8% and 11.8%, respectively. CleanCloud, a point-of-sale software company, is one of the largest move-outs of 2023 with 72,000 SF of space available in the Northwest Submarket. Overall, tech exposure remains limited in Las Vegas, but CleanCloud's vacancy proves no market is safe from tenant downsizing in this environment.
The retail vacancy rate in Las Vegas has remained in a narrow range and is currently at 5.1%, near the 15-year low. The single-tenant vacancy rate is typically 300-400 basis points below the multi-tenant vacancy rate and has spurred consistent development of pad sites. Retail leasing volume saw an uptick in the fourth quarter
and mirrors the five-year average. Low space availability is impacting leasing volume more than demand, as several retail brokers note the leasing environment remains highly competitive, particularly on the Las Vegas Strip and high-income suburbs of Henderson and Summerlin.
Tourism is the main economic driver in Las Vegas, as the destination is famed for its gaming industry, nightlife, convention business, events, and expanding sports destination. Las Vegas is the nation's largest hospitality market by room count and still achieves the third-highest 12-month average occupancy in the U.S., only trailing New York and Oahu. Driven by leisure and group demand, the 12-month occupancy through February was 78.7%. In 2024, RevPAR is projected to increase by approximately 8%, lifting occupancy above 80% and ADR above $200, a historic peak. The market is boosted.
by hosting mega events such as the Formula 1 Grand Prix race and the 2024 Super Bowl.
The Boring Company, a tunnel construction firm founded by billionaire Elon Musk, is expanding a major underground transportation project in Las Vegas and adding a corporate location in Austin, Texas, as the startup tries to test superfast hyperloop transit across the United States that could eventually affect real estate development.
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