The State of Commercial Property Investments in Nevada in 2022
COVID-19 profoundly impacted business dynamics, especially for commercial property owners. Hybrid office setups, changes to retail shopping methods, and supply chain issues within industrial centers all altered how people leased and used physical space.
But in post-Covid Nevada, industry trends point towards a more robust and healthy market. Recent reports note construction waitlists, steady appreciation (a year-over-year growth rate of 13%), and home sales at 8% between 2020-2021. The migration back to the low-tax business hotspot of Nevada has begun.
If you own or invest in an office building, a warehouse, industrial facility, or a shopping center, the return to commercial property offers unique investment conditions. Let’s examine the state of the Nevada market and how now is an ideal time for commercial redevelopments.
Top Benefits of Investing in Commercial Property in Nevada in 2022
First, even before the post-pandemic markets accelerated the return to the office, Nevada’s property management industry offered several advantages to commercial owners:
- Tax-Friendly Environment: Nevada has no corporate or income tax, in addition to no estate tax or inventory tax. Not only does this incentivize more businesses (who need your commercial space), but it involves less tax on any appreciation or cash flow earned from your property.
- Available Space: Vacancy rates in Las Vegas did increase to 13% in 2021, but overall lease rates increased over the same year as well. Clearly, businesses relocated throughout lockdown measures, but Nevada had the market size and construction pipeline to accommodate such property changes. Extensive available commercial space creates a resilient market for owners.
- Low-Cost Operations: Nevada has few regulatory and licensing fees, in addition to minimal price points for utilities (due to cheap natural gas) that create attractive conditions for commercial property owners.
- Access: Not only does Nevada have a thriving workforce (1.5 million workers with an unemployment rate of 6.2%), but it also has direct access to 56 million tourists and an additional 60 million connected to the region via transportation and California’s five trade ports.
While the pandemic had a marked effect on economic growth, the primary benefits of Nevada property remain the same. The state already offered good incentives for investment, but now, with markets recovering and vacancy rates set to decline, the chance for greater returns is apparent.
Government Commitment to Commercial Property Infrastructure
The Nevada Governor’s Office of Economic Development (GOED has committed extensive resources to help build infrastructure that will bring in further commercial investment.
The Southern Nevada Infrastructure Development Working Group’s (WG) Executive Summary (ES) outlined several projects:
- Rail and Truck Connectivity: Close to 70% of all trucks in Nevada move to and from the ports in California. The state continues to support the conveyance of freight, which will attract manufacturers — the very manufacturers who need the commercial space you own. Moreover, the government has set up financial programs for smart ports, electric vehicles, autonomous trucks, investment in supply chain side lithium, and access to railways that will free up commercial-zoned land next to Southern California’s 25 million consumers.
- Sustainable Initiatives: A commitment to clean energy from Nevada will improve efficiency and lower costs for all property owners. For example, the $2.5 billion Greenlink project of 525 Kv electrical lines looks to boost the State of Nevada’s energy grid with renewable sources and supply green energy to construction zones. The Silver State wants to grow its green footprint, furthering a world-class zero-carbon infrastructure system that is reliable and efficient. As a result, property costs will drop, and land access for further commercial development will improve.
- Land Development: Installations of stormwater retention piping and surface transportation will increase the total acreage of land available for commercial use. The state of Nevada has already spent $156 million in infrastructure improvements since 2016 in industrial/commercial zoned areas. Better supply may alter current prices, but it also infers healthy growth for all landowners.
Together, such government policy and investment will encourage $690 million in economic activity, creating advantages for property owners who can meet the rising demand as enterprises relocate to Nevada.
Favorable Economic Conditions in Post-COVID Nevada
Such top-down investment from the state help accelerates the growth of commercial real estate. Combined with the resurgence of the local and global economy post-COVID-19, price, sale, and property values in Nevada have rebounded:
- Asking rents for multifamily property rose by 11.3%
- Industrial rents increased at 8.9%
- The construction pipeline now works on over 1.2 million square feet of retail space
- Leasing activity reached a high of 2.9 million square feet of signed space.
- Industrial property vacancy rates in Northern Nevada dropped to 2.8%, the lowest since 2018, while Southern Nevada dropped 100 basis points during the second quarter of 2021 alone.
In short: the recovery of commercial property is in progress. Consumer and business demand for space continues to rise as people return to the office and migrate back into cities.
Reinvesting in Your Commercial Property
The return to value for commercial property is likely to continue as economies recover, offering prosperous conditions for real estate investment. The post-COVID incentives are plentiful, and that will further increase appreciation as business activity rebounds to pre-pandemic levels. Government spending now offers attractive methods to increase property value while also improving the quality of your building. Whether it is infrastructure upgrades, installing green building material, or retrofitting your current commercial space to meet client demand, finances diverted into building upgrades can better capture the forecasted growth of the entire Nevada property market.
The trends of government spending, business-friendly regulations, and the return to the office have all contributed to a hot commercial property market in Nevada. If you want to maximize your current holdings, now looks to be an ideal time to reinvest. Updates will leverage government incentives, increase building appreciation, and help you sign lease agreements with priority clients.
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