Havasu Industrial Rents Are Correcting and Underwriting Must Change

Industrial rents in Lake Havasu City climbed fast over the past few years. Landlords got used to strong demand, and pricing followed. Now the market is finding its level, and the Havasu industrial rent correction is material. Not every landlord has adjusted asking rents to reflect what tenants will pay today. That gap between asking rents and achievable rents is where deals die and opportunities emerge.

What Nine Months of Vacancy Reveals

Mispriced rents have created a split market, and one current industrial listing makes the dynamic clear.

The building has three units, with one rented and two vacant. The asking rent is $1.58 per square foot per month. The smaller vacant unit is about 1,375 square feet, putting the monthly ask near $2,175. The larger unit is roughly 3,500 square feet, with an asking rent near $5,500 per month. Neither unit has moved in nine months.

When rents were climbing, those numbers may have looked reasonable. With the market pulling back, the asking rents now appear out of step with what tenants will pay. The vacancy cost compounds each month the units remain empty, making nine months of vacancy a costly sign that the pricing needs attention.

How Underwriting Must Change

When rents are still finding their level, underwriting from peak pricing can undermine a deal before it closes. Accurate analysis starts with a lower rent floor, not a landlord's asking price or a past market peak. It starts from the number a real tenant will actually sign for today.

Randy Shuffler applies this discipline when working with buyers pursuing a 1031 exchange. A buyer burning through a 45-day identification window cannot afford unsupported market assumptions. If the pro forma relies on rents tenants are not paying, the investment can underperform once lease-up begins.

Randy recently applied the same approach while working with a 1031 buyer:

"I'm using lower rent floors. Just like the guy I was working with on the 1031 this week. I'm doing all my analysis off rent at a lower amount. Because then if he can't buy it and I can't lease it at that number, I'll look like an idiot."

— Randy Shuffler, Founder and Principal Broker, Lake Havasu City Commercial

Set the rent floor at what a real tenant will sign today, then build the pro forma from that number.

Not sure what rent floor to use for a property you're evaluating? Reach out to Randy at Lake Havasu City Commercial before you finalize your underwriting.

Why Available Space Isn't Always a Deal

Vacant industrial space is available across Lake Havasu City. Yet stabilized, well-tenanted buildings priced on real income remain scarce. Available space is not the same as an available deal.

Randy has watched this contradiction play out across multiple cycles in the Havasu market.

"It's really weird. It's hard to find tenants. The inventory of open spaces, there's a lot of spaces you can lease, and it's hard to find tenants. But there's not a lot of good buildings to buy. People with good tenants, good buildings, they're selling fast."

— Randy Shuffler, Founder and Principal Broker, Lake Havasu City Commercial

That gap rewards investors who identify stabilized assets quickly and move with accurate underwriting. It can hurt investors who assume leasable vacancy signals a buying opportunity. Two completely different market conditions can occupy the same zip code at the same time.

For more on why stabilized small-bay assets move so fast, see the piece on small-bay industrial scarcity in Lake Havasu City. It explains why visible vacancy does not always mean abundant supply.

Where Out-of-State Investors Get the Math Wrong

Out-of-state investors can make this mistake when they bring assumptions from higher-cost markets. An investor might underwrite at the $1.50 peak when comparable space now supports closer to $1.10 to $1.30. That gap between assumed rent and market rent is not a rounding error. It can be the difference between a deal that pencils and one that struggles to lease.

Lake Havasu City's tenant pool limits what local businesses can sustainably absorb in occupancy costs. Rents ultimately have to reflect what local businesses can support. Higher-cost market assumptions do not determine local demand.

The correction working through the market right now is not a crisis. Rents that climbed fast are settling toward levels the tenant pool can sustain. Landlords who adjust asking rents to current conditions have a better chance of leasing their space. Those holding at peak pricing risk longer vacancies.

What Accurate Rent Analysis Requires

Evaluating a listing or advising a buyer starts with verifiable, current rent data. Accurate rent analysis should:

• Pull recent comparable lease transactions from CoStar or local broker records.
• Compare similar unit sizes, property types, locations, and industrial categories.
• Match the lease structure before comparing rents, as NNN, modified-gross, and gross leases produce different owner economics.
• Build the pro forma around the rent recent comparable leases support.
• Stress-test the deal using a lower rent assumption.

For example, if the deal still pencils with rents 10% below your comp baseline, you have additional margin for error. If it only works at the top of the comp range, you are underwriting hope. That process does not change based on how much a landlord paid for the building. Tenants, not sunk costs, set market rent. 

Net Operating Income (NOI) affects valuation, debt service coverage, cap rates, and exit pricing. When lower rents reduce revenue, NOI can decline with them. At the same cap rate, a lower-income building is worth less. For buyers weighing current pricing against leasing, see the analysis on leasing longer versus owning.

Havasu Industrial Rent and Underwriting FAQs

Are industrial rents in Lake Havasu City dropping?

Industrial rents in Lake Havasu City are correcting from elevated levels reached in recent years. Current local reporting places rates below the COVID-era peak. For more context, see Why Falling Havasu Industrial Lease Rates Are Good News for Investors. 

What is a realistic industrial rent per square foot in Lake Havasu City right now?

Current local reporting puts Havasu industrial lease rates around $1.10 to $1.30 per square foot. Actual achievable rent varies by unit size, condition, location, and lease structure. Investors should validate assumptions against recent comparable leases rather than relying on a market-wide range alone. 

How does a Havasu industrial rent correction affect property values?

A rent correction can reduce property value when it lowers sustainable Net Operating Income (NOI). At the same cap rate, lower NOI produces a lower indicated value. Investors who buy based on peak rents therefore risk overpaying if actual lease-up supports less income. For more on underwriting beyond advertised cap rates, see Triple Net Listings Lie and Only True Cap Rate Matters.

Why is it hard to find good industrial buildings to buy in Havasu if there is so much vacant space?

Vacant leasable space and investable buildings are two different categories. Stabilized properties with paying tenants can attract strong buyer interest, while vacant properties may sit longer when asking rents exceed achievable levels. The result is visible vacancy alongside limited quality buying opportunities. 

What should a 1031 investor watch out for in the current Havasu industrial market?

A 1031 investor working a 45-day identification window faces compressed decision timelines. The primary risk is underwriting from optimistic rent assumptions and purchasing a building that cannot support those rents during lease-up. Conservative rent-floor analysis, based on what tenants are actually signing today, helps protect against that outcome. The goal is to identify replacement properties quickly without sacrificing underwriting discipline. 

How do I know if an industrial listing is priced correctly for current market conditions?

Compare the asking rent with recent lease comps for similar unit sizes, property types, and locations. If the asking rent sits materially above achievable market rent, the property may be overpriced. Vacancy duration provides another useful signal, but it should be evaluated alongside property condition and tenant demand. Then rebuild the property's pro forma using achievable rent rather than the advertised rate. Stress-test the deal at an even lower rent to determine whether enough margin remains.

Should landlords lower asking rents or wait for the market to recover?

Landlords should compare the cost of vacancy with the revenue gained from holding firm on asking rent. Low debt service may give some owners more flexibility to wait. Prolonged vacancy still creates carrying costs and lost income, so the decision should be based on property-specific economics. For more on the financial impact of holding firm on commercial rents, see Commercial Rent Ceilings and What the Math Proves.

How does the Havasu industrial rent correction compare to what is happening in Phoenix metro industrial markets?

Phoenix and Havasu operate at different scales and serve different tenant pools. Phoenix's industrial market is showing declining vacancy and relatively stable asking rents in 2026. Havasu's smaller market requires investors to rely on local lease evidence rather than Phoenix or Southern California benchmarks. 

Get the Havasu Rent Numbers Right

Industrial space in Lake Havasu City is correcting, and today's deals require different rent assumptions. Investors who protect their capital start with current rent floors and realistic income assumptions.

Contact Lake Havasu City Commercial with the property address to request a true-net snapshot based on current market rents and property income. Randy can then walk you through the property's income potential and what the numbers support today.