Las Vegas Office Investment Forecast
Las Vegas Metro Area, 2018 Outlook
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Slowing Completions Boost Office Market; Yield Strategies Underpin Investment Demand

Healthy office-leasing trends underpin marketplace as pipeline dries up. Following the highest pace of deliveries of the current cycle, the Las Vegas office market performed extremely well, with vacancy falling precipitously as net absorption rose substantially. While owners opted to clip asking rents amid the flow of new assets, a sharp decline in completions this year will restabilize supply and demand. As employment growth remains above the national average, office-using headcounts will rise by more than 3 percent in the year ahead. Firms are likely reaching capacity in their existing spaces, with vacancy remaining more than 600 basis points above 2007, offering reductions in the months ahead as the new space is absorbed. The average asking rent will return to positive growth as well, providing investors with expanding NOIs, particularly as vacant spaces are leased up at cur-rent market rates. Properties in areas where vacancy is extremely tight, such as Downtown and the northern Las Vegas suburbs, will far outpace the metro average for rent growth.

Yield-seeking out-of-state investors bidding for attractive returns. Coastal capital remains a major factor in the Las Vegas metro, driven by buyers seeking returns that can exceed their local markets by 300 basis points or more. First-year returns in Las Vegas will begin in the mid-7 percent band, with potential upside through raising occupancy and stabilizing underperforming assets. While institutional investors are likely to position in the core and near the Strip, buyers seeking more aggressive strategies will focus on non-core submarkets to the south and west of the city center, where a firm recovery has yet to truly take hold. As conditions improve, these buildings and locations could see a dramatic turnaround due to their proximity to suburban households. Medical office properties in these areas will also benefit dramatically as the number of retirees in the metro continues to rise at levels that far exceed the national average.