Las Vegas’ commercial real estate industry soared with the boom, collapsed with the bust, then was quiet for a few years.
Today, business is picking up.
Investors are building projects, signing leases, and, to tenants’ dismay, raising rents. Buyers also are scooping up properties but not as often as they did a few years ago, when prices were lower.
On the Strip, two new resorts are in the works but moving slowly, and the mothballed Fontainebleau — a towering reminder of the real estate bust — is up for sale. Meanwhile, the apartment and industrial sectors are heating up as developers flood the valley with new projects.
“Southern Nevada’s blood is pumping once again,” John Stater, Las Vegas research manager at brokerage firm Colliers International, wrote in a recent report. “The economy may not have diversified, but the band is back together, and that will have to do for now.”
Here’s an overview of what happened this year and what to expect in 2016.
Southern Nevada’s office sector is rebounding slowly after getting pummeled during the downturn, but it lags behind other types of real estate.
The third-quarter vacancy rate was 18 percent, compared with 19 percent a year earlier, and landlords sought an average $1.95 per square foot in monthly rent, up from $1.88, according to Colliers.
Construction is limited, although proposals are floating around. Forest City Enterprises, for instance, has drawn up plans to develop three office buildings near Las Vegas City Hall. It’s far from certain, however, that Forest City will build anything, and some real estate pros questioned why the company was considering such a big project — more than 500,000 square feet — in a badly bruised market.
Landlords also are trying to sell big chunks of property. Hines Interests and Oaktree Capital Management want to unload more than 895,000 square feet of offices, spread across 18 buildings in Summerlin, and American Nevada Company recently listed 1.3 million square feet of property, mostly in Henderson. The bulk of that portfolio is office space.
The Hines-Oaktree portfolio is 92 percent occupied, according to its listing broker at CBRE Group. American Nevada’s portfolio is 84 percent leased, according to a marketing brochure. (Brian Greenspun, owner of VEGAS INC publisher Greenspun Media Group, holds an ownership stake in American Nevada.)
“The office market may not be pretty, but slowly and surely, it is getting things done,” Stater wrote.
In the suburbs, perhaps the most anticipated retail project is Ikea’s new store at Durango Drive and the 215 Beltway. The discount-furniture dealer broke ground in April on a 351,000-square-foot store scheduled to open in summer 2016.
Near Summerlin, though, Tivoli Village’s long-planned expansion has moved slowly. Management has said that upscale home-furnishings store Restoration Hardware plans to open there in 2016, but otherwise, it has stayed mum in recent months.
Discount-clothing chain H&M reportedly signed a lease for the expansion site, and a local broker said hotel group Kimpton has been in talks to open there between fall 2016 and spring 2017.
Meanwhile, in the past year or so, grocery chains Food 4 Less, Haggen and Fresh & Easy closed stores or unveiled plans to shutter outlets in Southern Nevada. Grocery stores often are anchor tenants in shopping centers, and if one shuts down, foot traffic to the plaza drops, potentially crimping sales for other retailers.
But not every grocer in town is shrinking. Save-A-Lot debuted a store in August on Charleston Boulevard at Maryland Parkway, with plans for two more in Las Vegas by early next year. Also, Haggen recently struck deals to sell four of its seven local stores as part of a company-wide purge.
The construction industry remains a shadow of what it was last decade, but carpenters, architects and other workers are back on the job, thanks in part to the apartment business.
Developers are building rental complexes across the valley, mostly in southwest Las Vegas and Henderson. About 1,700 units were completed in 2014, with roughly 5,750 units projected to open this year and almost 2,000 in 2016, CBRE officials have said.
Some industry insiders, however, say developers might be overbuilding. Market-wide rental prices have climbed and vacancy rates have dropped over the past few years, but a glut of new properties could push down prices. That could empty out older buildings as tenants jump to newer properties with more amenities.
Investors are buying fewer apartment buildings amid rising prices, though one recent deal stands out. The 110-unit Vantage Lofts, a stylish, formerly abandoned project in Henderson, sold for roughly $38.2 million in September. That amounted to $347,000 per unit, more than four times the valley’s current average sales price of $80,401 per unit.
The other big source of commercial construction is industrial property. But many developers are breaking ground and drawing up plans without tenants lined up, a risky approach.
More than 1.7 million square feet of warehouse, distribution and other industrial space was under construction in Southern Nevada by third quarter’s end. Additionally, more than 5.4 million square feet is being planned, according to Colliers.
The projects mainly are concentrated in North Las Vegas and the southwest valley. Most don’t have tenants.
Demand for space, however, appears strong. Southern Nevada had a 5.8 percent third-quarter vacancy rate, down from 8.7 percent a year ago and almost 15 percent in 2010.
Business boosters and others have said Las Vegas has a shortage of large industrial buildings. Time will tell, however, if investors are building too quickly and outpacing demand.
The resort corridor, the foundation of Southern Nevada’s economy, isn’t sprouting casinos everywhere, but it had a fair amount of activity this year.
In a rewind to the 1990s and 2000s, a hotel was imploded to clear space for a new one. Investor Lorenzo Doumani in February toppled the 12-story Clarion near the Las Vegas Convention Center. He said he plans to replace it with a 60-story hotel.
Construction also is underway on Resorts World Las Vegas, a $4 billion Chinese-themed megaresort being built around the skeleton of the once-abandoned Echelon. The resort is slated to open in 2018, but work appears to be slow going.
Next door, the two-tower, 1,100-room Alon Las Vegas is scheduled to open in 2018, though construction hasn’t begun.
Meanwhile, two abandoned construction projects blighting the resort corridor are up for sale.
On the north Strip, billionaire Carl Icahn recently listed the 68-story Fontainebleau, which he bought out of bankruptcy in 2010 for $150 million. The tower has sat untouched for years.
On the south Strip, investor Howard Bulloch is trying to sell 38.5 acres, including the site of his stalled SkyVue observation wheel. Project plans called for a 500-foot wheel with 32 gondolas, but Bulloch stopped construction a few years ago. The project now consists of two towering, concrete columns sticking out of the ground and little else.
If Icahn and Bulloch sell their properties, it could bring life to eyesore parcels. But they’re seeking hefty paydays: Icahn hopes to land about $650 million, and sources said Bulloch wants more than $10 million an acre, or more than $385 million total.