— By Roy Fritz, First Vice President, CBRE Retail Investment Properties – West —
Las Vegas’s retail investment market continues to hit the jackpot, mirroring the lucky winners that visit the city every week. The Valley remains a magnet for growth, attracting new investors who would never have considered Las Vegas in the past.
High-profile recent additions like the state-of-the-art, 70,000-seat Allegiant Stadium, Formula 1 Las Vegas Grand Prix race, MSG Sphere and the Fontainebleau luxury resort and casino have retailers and investors drawn to the city’s bright lights as they seek out that next big win.
Major League Baseball is also making its mark in Las Vegas with the Oakland Athletics’ planned move to the city. The new stadium, set to open in 2028, will feature a 33,000-seat capacity and state-of-the-art amenities. It will also further cement Las Vegas as a premier sports and entertainment destination.
This growth is supported by strong underlying fundamentals and economic diversification. The sentiment across the Valley’s business landscape is that the area has clearly transitioned from a tertiary market, which was highly dependent on Southern California capital just a few years ago, to a solid secondary market. This transformation has attracted investments from all over the country and the world, highlighting Las Vegas’ increasing appeal and economic strength.
Despite this growth, Vegas still faces some challenges. Two of the city’s most pressing needs are additional developable land and a deeper pool of highly skilled workers. Several bills have been proposed to address these issues and unlock additional lands owned by the federal government, particularly in the southern part of Las Vegas.
The University of Nevada, Las Vegas (UNLV) also continues to evolve. It gained the R1 research designation in 2018 – the highest possible tier a doctoral research university can achieve in the Carnegie Classification. This designation not only enhances the university’s reputation, but attracts top-tier talent and research funding, further contributing to the city’s growth and innovation.
On a macro level, Las Vegas is not immune to impending headwinds. The city is, however, better positioned to weather an economic storm than ever before. The number of nationwide store closings has soared past any full-year total since the height of the pandemic in 2020. Bankruptcy filings from companies like 99 Cents Only Stores, Conn’s HomePlus and American Freight have led to the closure of their entire portfolios of stores. Meanwhile, Family Dollar, Big Lots, Walgreens, CVS and Rite Aid have announced thousands of store closings. Fortunately, the national vacancy rate is a tight 4 percent. The lack of robust retail development since the Great Recession should help ease the pressure on the supply that remains available in the U.S. market for an extended period.
As 2024 comes to a close, the 10-year U.S. Treasury yield experienced a significant decline, bottoming out at about 3.64 percent in September, which temporarily spurred activity. Unfortunately, this drop has since been completely reversed. A material increase in the yield has been realized, nearly hitting 4.5 percent post-election. The Wharton Business School projects a $4.1 trillion increase to the federal budget deficit on a dynamic basis (under which faster economic growth produces higher tax receipts) if the new administration fully enacts its policies. The recent rise in the 10-year Treasury yield is due, in large part, to the market’s concerns about current and projected federal deficit spending.
The Treasury’s rollercoaster has impacted Las Vegas’ 2024 retail investment sales volume, which saw an 18 percent drop year to date from 2023. Fortunately, several notable transactions will close before the end of the year that will likely push investment sales volume higher (year over year) compared to 2023.
Mountain’s Edge Marketplace, a 115,037-square-foot shadow-anchored Albertsons center, is expected to close escrow by year’s end. The $50-million-plus shopping center is situated within the Mountain’s Edge master-planned community.
Our firm also recently brokered the sale of Gramercy Commons, a 25,892-square-foot, multi-tenant retail center leased to a variety of retail, service, entertainment, fitness, medical and restaurant tenants. Located on South Fort Apache Road, CBRE generated multiple offers and closed at nearly $8 million, representing a 6.77 percent cap rate.
As we look ahead to the uncertainties of 2025, one thing remains clear: in Las Vegas, the house always wins – and so do the investors and capital looking to place property bets in this one-of-a-kind, growing, dynamic market.
This article was originally published in the November 2024 issue of Western Real Estate Business.