Dan Hubbard, Cushman & Wakefield | Commerce
It is great to be in Las Vegas and witness the city’s strong recovery from the economic lows of a few years ago. Exciting projects like the $500-million LINQ entertainment and retail promenade, the 1.6-million-square-foot Downtown Summerlin lifestyle center and the market’s first IKEA, now under development, are filling the region with promise.
Las Vegas added more than 25,000 jobs between 2013 and 2014, a 3.3 percent increase, representing the third highest growth rate in the country during that time. As opposed to the previous economic boom that was largely driven by construction growth, the job growth in this recovery has been evenly spread across several sectors like general services (retail), professional/business, education, healthcare and leisure/travel. Las Vegas also hit a milestone in 2014 when it reached a record-setting 41.1 million visitors for the year. Those visitors included 5.2 million conventioneers, the highest total since 2008.
As the Las Vegas economy continues to expand, retail is leading the pack with taxable sales that have already increased an astounding 29.4 percent from the recession low, including an 8.1 percent year-over-year increase in the past 12 months. Total taxable spending in the region is near its highest levels in history, reaching $36.2 billion in 2014. Local economists are projecting area spending will reach an all-time high in 2015.
Although the retail market is growing and has recently added a few major retail projects, suburban and neighborhood retail developments have generally been largely non-existed for several years. This has helped the market achieve a quicker balance in its supply and demand, which has caused the market vacancy rate, currently at 9.4 percent, to stay below 10 percent for seven consecutive quarters.
Retail investment activity in Las Vegas has also been very strong over the past 12 months, with a large increase in more stabilized and traditional sales, and fewer distressed or bank-owned sales. The average price per square foot on multi-tenant sales is now nearing $200 per square foot, while cap rates have compressed down to the mid-6 to low-7 percent range for good-quality assets. Cap rates on single-tenant sales have compressed even further down to the low to mid-6 percent range.
The forecast for 2015 is continued growth in visitors, conventions, taxable sales, residential development, entertainment and even some suburban retail development. Next time you come visit, it is very possible you will see several new projects, including AEG and MGM’s new 20,000-seat arena, Downtown Summerlin, MGM’s The Park retail promenade, The Cromwell, Grand Bazaar Shops, SLS Hotel & Casino, Rick Harrison’s Pawn Plaza, The Delano at Mandalay Bay, Resorts World Las Vegas, Las Vegas Outlets expansion, Mall at Galleria expansion and a highlyanticipated IKEA.
By Dan Hubbard, Director-Retail, and Todd Manning, Senior Associate-Retail, Cushman & Wakefield | Commerce. This article originally appeared in the March 2015 issue of Western Real Estate Business magazine.