Tuesday, January 17, 2012

Office Dead Zones!

Last week we took a look at where all of the distressed office space was located in Southern Nevada, and discovered no real pattern.

Today, it's time to take a look at office activity in 2011 and seek out the dead zones - those areas of town that didn't show much, if any, lease or sales activity (i.e. gross absorption).

This map plots two different sets of data.

The first, in the large, grey dots, are the locations of available office spaces in Southern Nevada in 2011.

The second, in the smaller, yellow dots, are the locations of office buildings that saw their total square footage of available space decrease between the fourth quarter of 2010 and the fourth quarter of 2011. If I get some more spare time, I'll do this exercise on a quarter-by-quarter basis, but this map will have to do for now - and it does show the location of about 3.3 million square feet of lease and sales activity.

Click the image for a magnified view.

So, what do we learn?

At first glance, it seems as though there is no big pattern. Businesses are taking space all over town, and this probably indicates that the key driver is not location or age of property, but price. We are probably seeing a flight to affordability, rather than a flight to quality.

With a closer inspection, though, we do see a few small dead zones.

The first dead zone is on the southern portion of Fort Apache, near the "Curve" of I-215. While these projects are fairly easy to access via I-215, they appear to be just far enough off the beaten path to be struggling.

There are avails in North Las Vegas that are having trouble competing, but North Las Vegas, on the whole, appears to be doing fairly well in terms of leasing activity.

More interesting is the dead stretch on west Cheyenne, between US-95 and I-215. This is Summerlin territory, and traditionally highly sought after. This may bolster the case for "flight to affordability", but might also show the impact of distressed space on leasing. A few projects in this area were up in limbo until recently, and unable to effectively compete for tenants.

The final dead zone - and not a surprise - is located on Lake Mead Blvd in Henderson. It's a bit out of the way, and not an area known for its office product.

Other than those few zones, it appears that leasing and sales are taking place wherever there is space available - assuming the price is right.

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