The Las Vegas Valley industrial market continued to signal weakness with an increasing vacancy rate and falling average asking rents amid turbulent conditions within the sector. No new inventory came to market as several projects remain stalled or delayed due to a lack of demand and an abundance of supply. Nearly 351,000 square feet of industrial space in four buildings remain under construction with limited product in the pipeline.

The market reported approximately 841,600 square feet of negative net absorption during the quarter, bringing the total amount of vacant space to nearly 16.8 million square feet. The latest figures reflect the sixth consecutive quarter of negative net absorption and the 16.2 percent vacancy rate is a new record high for the Las Vegas region. The vacancy rate climbed 0.8 points during the past three months, but it is worth noting this is the smallest increase since the fourth quarter of 2008. Nevertheless, the vacancy rate has steadily climbed since the recession began in late 2007 and compared to the same quarter of the prior year (Q2 2009), the vacancy rate increased 4.0 points, or from 12.2 percent to 16.2 percent.

Reacting to additional supply in the market, average asking rents continued to trend downward for the sixth consecutive quarter. On average, across the valley and all product types, asking rents of $0.58 per square foot per month remained down 3.3 percent from the $0.60 witnessed during the previous quarter (Q1 2010) and 18.3 percent from the $0.71 reported just one year ago (Q2 2009). Average rates continue to be impacted by the mix of property types available and the level of space within each category, while effective rents are declining due to increased concessions and lower contracted rates.