The Las Vegas valley’s economy continues to work toward recovery but we still may not be completely out of the woods quite yet. All three submarkets of Commercial Real Estate (Industrial, Office and Retail) showed positive signs in the 2nd quarter of 2014, according to the Lied-RCG Commercial Real Estate Survey (“the Survey”). While many indicators inspire confidence, the sectors are advancing unevenly and the Survey does note some reasons to worry.

The vacancy rate was down, rents were up and job growth has been strong in the Industrial sector. Demand increased for the 7th consecutive quarter. Construction employment in the sector increased around 14% in the last year.

Performance metrics for the Valley’s industrial market in the last four quarters indicate that we are now in the midst of a recovery.

While there were no industrial completions during the quarter, the Survey noted five projects, totaling 1.029 million square feet, under construction – FedEx Distribution Center, Nicholas & Company, and expansions at Konami Gaming, TJ Maxx and Tapia Brothers.

The Survey touted the industrial vacancy rate passing the milestone of 10%, dropping to 9.7% during the quarter. According to the Survey, “This is a signal, concerning the health of the industrial market, for which the industry has long been waiting.”

The Survey sees some positive signs in the Office market, which it notes “is the most directly dependent on job growth” and is also the largest of the three in terms of employment, comprising 31% of private-sector jobs.

[T]his quarter’s data give us hope that the office market might be finally starting to show signs of recovery, since it reached its lowest vacancy rate in four years and dropping 2.1 percentage points in the last three quarters.

The vacancy rate in the sector fell for the third straight quarter but continues to remain above 20%. No new space has entered the market in 13 of the last 18 quarters. So far this year 42,700 square feet has been completed compared with “between 1.1 million sf and 4.3 million sf” per year from 2003 to 2008, according to the Survey.

Still, 2014 should be a better year and there are a few expected completions to come.

Three projects under construction will likely be completed this year, the Survey notes, Downtown Summerlin, the Cadence Marketing Center and two buildings at the Gramercy.

Mentioning that rents in the Retail market rose for the first quarter since Q1 2012, the Survey notes,

While one quarter does not make a trend, we believe that this is a very good sign that the anchored retail market is (or is near) bottoming out. The continually declining vacancy rate is evidence of this.

The increase in taxable sales also bodes well for this sector. The Survey reveals a 4.8% year-over-year increase in March, which marked the greatest taxable sales since December 2007. Subsequent to the Survey’s release a report was issued indicating taxable sales in May 2014 were at their highest level ever for that month, even surpassing the pre-recession high for May.

No construction of anchored retail space has been completed in two years and just two centers are currently under construction, Green Valley Crossing in Henderson and a center in the Northwest. The lack of construction, according to the Survey, will help the market “move toward a 10% stabilized vacancy rate,” which it predicts to occur in about five quarters.

The Survey concludes with a note of apprehension,

We remain a bit worried that real (inflation adjusted) incomes continue to flounder, but barring any unforeseen events, we believe that wages and spending power will see some improvement in 2014 as the job market continues to solidify.