— By Todd Manning, Managing Broker, NAI Vegas, and Maria Herman, Senior Vice President, Retail Division, NAI Vegas —
The Las Vegas retail market continues to perform well into 2023 despite a few headwinds (and headlines) dogging the industry. The success is due in part to Las Vegas continuing to experience strong growth coming out of the pandemic years. For example, visitor volume to Las Vegas reached more than 3 million people in February 2023, which was up 17.8 percent year over year, but was still down 3.4 percent from February 2019.
Speaking of performing well, Las Vegas’ retail vacancy rate has been holding steady at around 5.2 percent, just slightly lower than it was a year ago. It is also the market’s lowest retail vacancy rate in over 15 years. Rent growth is slowing, however, and is down from the 10.4 percent gains of one year ago.
Rent growth has been another bright spot for Las Vegas retail landlords as rates continue to increase at 7.7 percent year over year. Rent growth is slowing, however, and is down from the 10.4 percent gains from a year ago.
Not surprisingly, the investment market for commercial property, retail included, has experienced the biggest impact from rising interest rates. Transaction velocity of retail assets in the Las Vegas MSA was down 28 percent in the first quarter of 2023 compared to the same period a year ago. Even more dramatic, sales volume was down nearly 75 percent. Diving deeper into the data, it’s primarily the larger sales — $10 million and up — that have disappeared and are causing the big discrepancy in volume.
Despite the slowdown in transactions and sales volume compared to last year, the statistics are nearly identical when compared to the same period in 2019, albeit with today’s average sales price (per square foot) still being 25 percent higher than 2019. The economic sentiment among Las Vegas residents and retail brokers remains very optimistic with several major developments in the works. This includes the multi-billion-dollar Fontainebleau Las Vegas, the $2.2 billion MSG Sphere, the $1 billion-plus Las Vegas Grand Prix and a little event named Super Bowl LVIII. There are also discussions being had around the NBA, MLB and MLS to bring even more major sporting venues and events to Las Vegas. Needless to say, we continue to be bullish on the future of retail in Las Vegas.