The Las Vegas commercial real estate (CRE) market has continued its recovery and stabilization since emerging from the pandemic. Positive signs for Q2 2022 include reduction in vacancies, positive net absorption, increased asking rents, and the delivery of two projects adding 188,909 square feet (sq/ft) office space to the market.

Strong pre-leasing and inquiry numbers for planned and under-construction projects, along with a rise in companies looking to the Las Vegas Valley to expand or relocate operations entirely, round out the positive sentiment currently seen in the market.

For office product in particular, Las Vegas saw a Q2 of mixed results. On the back of some notable expansion in Q1 2022, Southern NV’s office market has appeared to cool at mid-year. Investment prices reached record levels, however, vacancy rates edged higher. The Southwest submarket continues to see rising rents and additional leasing activity as tenants continue to funnel to this historically popular region. 

There are currently 4,660 CRE spaces for lease in Las Vegas, amounting to 41.5 million square feet of space. Out of the 1280 commercial buildings available for sale, 505 have been leased in the past month, with 12 new listings coming onto market at time of print.

Key Takeaways

• Total inventory under construction – 468,400 square feet 
• Overall vacancy – 12.7% (a rise from 12.5% in Q1)
• Net absorption – negative 284,323 square feet
• Availability – 6.2 million square feet
• Average asking rents – $28.50 per square foot per year (a decline of $0.02 from Q1)
• Investment sales – $50.5 million (down from $75.5 million in Q1)

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The adoption of new and exciting technologies has accelerated at a previously unforeseen pace in recent years, with the impact of the rapid changes that ensued now being felt across a number of industries. In the case of the real estate industry, the proliferation of proptech (property technology) has proven to be a significant factor changing businesses around the globe. In this article, we’ll take a deep dive into proptech and assess both its current and future impact on the commercial real estate market. It should also be noted that proptech encompasses both commercial and residential real estate technology, however, for the purposes of brevity we will only be exploring the commercial proptech sector. 

What is Proptech?

Proptech, also known as retech (real estate tech), essentially relates to the use of data and technology to help individuals and businesses manage, buy, sell, lease, and research real estate. The concept is not new, since the real estate sector has been using tech software for a number of years to store data, arrange virtual viewings, and help connect buyers and sellers. However, proptech capabilities have massively increased in recent years due to the development of newer and more refined technologies, such as artificial intelligence, Big Data, blockchain, cloud computing, and the Internet of Things.

Recently, we’ve seen unprecedented acceleration in the proptech field, largely fueled by new consumer expectations and the rapidly changing digital landscape. Moving into 2023, lingering uncertainty and persistent market shifts are tipped to continue spurring proptech’s advancement.

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Ensuring that employees feel valued and recognized has never been more important for business leaders than it is in the current world of work. Employers looking to build an environment in which employees are fully engaged and fulfilled with their work have been striving to find new and exciting ways to show their appreciation, with the ultimate aim of bolstering company culture and retaining top talent. The upheaval to the modern business landscape, brought on by COVID-19 and the long-running lockdowns that accompanied it, have resulted in an unprecedented sea change. Despite the majority of the world returning to some semblance of normality, the ripple effects are still being felt, with marked shifts in employee priorities, perceptions of management, and workplace desires. 

These shifts have been especially noticeable in the changed power dynamic between workers and businesses. Employees are now less likely to put up with mistreatment or less-than-ideal working situations. Instead, they have become more open to jumping ship for better working arrangements, rather than persist with jobs that infringe too much on their wellbeing.

Workplace trends such as improved flexibility in the workplace, including allowances for hybrid schedules and other non-traditional working models, the provision of additional benefits, and the renovation of workspaces to be more human-centric, have all become widely accepted as core to employee experience. The businesses who have arrived late to the party are now scrambling to catch up to competitors who reaped the benefits of quickly adopting some, if not all, of these trends.  

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Houston Office Market

Latest data from Q2 2022 shows Houston’s total office space inventory at 349.5 million square feet, a significant bump in supply from the mid-2021 figure of 173 million square feet. Despite the increase in stock, there have finally been gains in occupancy, with Q1 signalling this healthy marker for the first time since the start of the pandemic.

There were hints of this recovery at the end of 2021. The trend of last year’s subpar market performance was bucked by Class A and trophy office space (Class A+), which accounted for more than 60% of all leasing activity in Houston during Q3 2021. This positive influence has continued into Q2 2022, with Class A demand being the sole driver for occupancy gains in roughly half of Houston’s office submarkets.

Recently refurbished Class A offices, in developments built after 2005, are bucking the vacancy rate trends. These buildings report only 17% vacancy in Q2 2022, compared to the overall Class A vacancy rate of 25.6%. The new renovation programs undertaken by these mid-age office suppliers have clearly been a hit with Houston businesses, serving to satisfy post-pandemic amenity demands better than their newly developed A Grade counterparts.

Despite these low vacancy rates, the five largest leasing deals during Q2 2022 were for new and Class A CBD office space. This trend can be further illustrated by the newly completed Texas Tower, with occupancy already at 70% leased, despite only opening in the first quarter of 2022. As with the vast majority of major cities in the United States, the Houston CBD appears to be the focal point for the highest activity. 

Key Takeaways

• Inventory – 349.5 million square feet
• Overall vacancy – 23.4% (a slight decrease from Q1’s 23.6%)
• Net absorption – negative 90,000 square feet (due to coming off the back of the bumper mid-year figure of +641,7000 when several substantial tenants moved into newly completed offices)
• Availability – 27.6%
• Average asking rents – $30.80 (up 1.9% YOY)
• Investment sales – $156 per square foot (up from $116 in Q2 2021)

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