Cathy Jones, Sun Commercial Real Estate
The Las Vegas retail market is transitioning from recovery to stability. Based on CoStar’s second-quarter report, the overall vacancy rate was 9.9 percent, a slight decrease from the 10 percent experienced at the end of the second quarter of 2014. The decrease is impressive considering the 2 million square feet in net absorption that occurred during this same period. Rental rates have continued to average around $1.30 per square foot, per month for the past 2.5 years, although we are hearing about newer centers achieving impressive rate increases.
There was 822,512 square feet of retail space under construction at the end of the second quarter of 2015. Ikea is the largest retail project currently under construction in Southern Nevada, which is expected to open next summer. The second largest project is Tivoli Village’s 117,516-square-foot expansion. Restoration Hardware also signed a lease this quarter for 77,000 square feet at Tivoli. It is expected to take up occupy during the first quarter of 2016.
Though private investors dominate the market, we are seeing more institutional investors who are interested in acquiring newly stabilized product. Cap rates have continued to decline, averaging 6.53 percent for 2015, compared to a 2014 average of 6.99 percent. Most of the properties changing hands during these periods have increased in occupancy, making investors less wary about underperforming assets. There were 29 investment transactions during the second quarter of this year, totaling more than $168 million in value, with an average price of $184.65 per square foot. The retail market remains on the upswing as assets begin to stabilize and rent increases continue.
We expect to see even more new retailers tapping into the Southern Nevada’s retail market in the next 12 months. It is no secret that Chick-fill-A is on its way to Henderson. John’s Incredible Pizza Co. will be opening a 60,000-square-foot Pizza/Arcade at the Boulevard Mall this October. It is rumored that Cracker Barrel will be opening its first Las Vegas location at Craig and I-15 in North Las Vegas. These new additions are expected to increase positive absorption and boost the overall Southern Nevada economy.
The Department of Taxation released taxable sales statistics at the end of June that showed an increase of 6.8 percent for Clark County in April 2015 compared to April 2014. The largest increases in statewide taxable sales were realized by Food Services and Drinking Places, which were up 13.9 percent. Unemployment rates have also declined. The Bureau of Labor Statistics reported a preliminary unemployment rate for Las Vegas of 6.6 percent for May, representing the lowest unemployment rate recorded in the past seven years. Clark County and the Las Vegas Strip saw gaming revenue increases of 3.4 percent and 1.4 percent, respectively, with win gains in both table games and slots, according to the Las Vegas Convention Authority.
The market is continuing to evolve as new projects and retailers enter the market. At the end of the second quarter, the market was able to remain on the upswing. We expect continued improvement for the remainder of the year, reflecting the stabilizing retail market.
By Cathy Jones, Agent, Sun Commercial Real Estate. This article originally appeared in the August 2015 issue of Western Real Estate Business magazine.