New Projects, Offerings Keep Las Vegas’ Retail Market Exciting
After finishing 2016 with a bang, 2017 is shaping up to be another great year for retail real estate in Las Vegas. Tourism, construction, population growth, infrastructure improvements and business growth are all cause for excitement.
The Strip is once again predicted to dazzle retailers. There are currently more than $9 billion in construction projects underway or scheduled through 2019. The development lineup is dominated by Resort World, Steve Wynn’s Paradise Park and a hopeful sale of Fontainebleau. Alon is another exciting project that is looking to replace a major funding source so it can begin construction.
Several other important, but smaller projects are scheduled to come on line later this year and into 2018. These include infrastructure, retail expansion and additional hotel room projects. New retail and food arrivals to the Strip include Skechers, Walburgers, Morimoto, Sugarcane Raw Bar Grill, Giordano’s and John Rich’s Red Neck Riviera. Around 42 million visitors from the U.S. and around the world enjoyed Las Vegas in 2016, and we are anticipating even more in 2017.
Las Vegas population growth also continues. The city was ranked the 28th largest in the U.S. in 2016, while housing sales and construction continue to have healthy growth. Several retailers are expanding in our neighborhoods, including Chick-Fil-A, Pizza Rev, and many other fast food, fast casual and casual dining concepts.
We are quite excited to have 10 new ground-up developments of traditional grocery stores of more than 30,000 square feet in various stages of development. We have seen only one such project since 2007. Smith’s, Albertsons, Smart & Final Extra, Sprouts and La Bonita Supermarkets are among the grocers on the move. On the smaller end of the spectrum, Trader Joe’s and Natural Grocers have also been active, delivering new stores over the past two years.
New retail development square footage deliveries in 2017 are expected to be about half of what we saw in 2016, which will help absorption and increasing lease rates. Total retail square footage is close to 100 million square feet, with shopping centers and power centers comprising about 65 million square feet. In the same categories, average vacancy rates are hovering slightly under 9 percent, which is down from about 11 percent two years ago. Unemployment is at 5.1 percent, which is down from about 7 percent two years ago.
Not all areas are equally strong, however. Lower retail demand is felt in properties that are functionally obsolescent, such as elbow sections of shopping centers, and in areas that are overbuilt. Demand is high at good intersections in most parts of the city.
With all the dirt turning, cranes in the air, planned retail, planned entertainment, housing expansion, increased taxable sales and an increased consumer confidence level, it is bound to be another exciting year in fabulous Las Vegas.
— By Edward Lehnardt, Senior Vice President, ROI Commercial. This article first appeared in the March 2017 issue of Western Real Estate Business.