The wrap up to 2013 means that all year-end industrial real estate reports have been published, including ours. Based on the report you read – and every firm in town will have one – and whether sublease space is included, you’ll find vacancy numbers from 8.36% to 9.1%. But what do these numbers really mean? And if they vary from firm to firm, which numbers are really accurate?
What Those Market Vacancy Numbers Actually Mean
Quite literally, market vacancy numbers mean that of the roughly 73,500,000 sf of total industrial space in the Reno/Sparks/I-80 East corridor, about 6,500,000 is vacant. Which may lead you to ask, what does having 6.5 million sf available mean? How do you gain any value from knowing this figure, beyond repeating it to others? To be frank, there really is little useful information contained in that statistic.
Whether Those Market Vacancy Numbers Are Actually True
Now that we understand what the vacancy number actually represents, we need to understand its accuracy. Literally and statistically, yes, these numbers are true. On the other hand, no, they are not true. Bear with me for a moment. Market vacancy numbers are both accurate and inaccurate because that vacancy is an average of all the space sizes available. And that means that relying on those vacancy percentages would mislead anyone shopping for a warehouse to lease or buy, because they would definitely not apply to your options. If you’re looking to lease or buy a warehouse, you’re considering a specific size or range of sized location, such as a 20 to 25,000 sf warehouse. That size of warehouse definitely does not have a vacancy of 8.75%. It will vary considerably, with a much high percentage. Want a 350,000 sf warehouse? If you are expecting a selection from which to choose, you are completely wrong. In fact, the northern Nevada market has only one such warehouse today to meet that need. One. What is the vacancy in that size range? Far lower than 8.75%.
My point with those two examples is to alert the readers of the quarterly reports that one must use that data in the context it is presented – an overall market average. No matter whose reports you are seeing, it’s clear that vacancy is trending downward into what is considered an overall balanced market. That is a great takeaway from these reports. Most reports also have submarket statistics that drill down deeper and offer submarket vacancies, but few offer market vacancy breakdowns into the all-important warehouse size groups. There are warehouse sizes that currently have two to three times the vacancy as overall and conversely only a small fraction of the overall vacancy.
Market data can be extremely important to developers, buyers, sellers and certainly tenants. Accurate, relevant market data can give an edge in a negotiation. It can steer someone to or away from certain submarkets or uncover hidden value in a market. Work closely with your selected agency and utilize their goldmine of data and the excellent management programs they have to give you the focused information you need to make a better-informed decision.