By Cathy Jones, Founder and CEO, Sun Commercial
The 2022 Las Vegas retail market can be characterized by a generally positive outlook and some strong trends, even in the face of market uncertainty.
A few of these core trends are quite interesting. Market research shows significant upward trends in asking rents, decreases in vacancy and certain key indicators driving this process. When broken down further, we find that these trends are emphasized in certain geographic areas more than others. The Southwest Las Vegas Valley submarket is seeing the greatest change in growth and development, followed closely by Henderson/Southeast. As an example, 93,592 square feet of retail space was constructed in the third quarter alone in the Southwest and Henderson; 91.2 percent of this space was pre-leased.
The current amount of net absorption in the total market is 1.3 million square feet year to date. Half of this annual total occurred in the Southwest and Southeast submarkets. These two markets saw an explosion of growth driven largely by the housing boom. As new developments are constructed and homes sold, retail developments expand to meet that growing demand. There is more compartmentalization, however, than in the past with more community-oriented unanchored strip centers dominating the new retail space being constructed. As evidence of this, we see that strip center rents have increased from $1.38 per square foot to $1.80 per square foot in the past decade, while anchored centers have seen a decrease of nearly 7 percent in the same timeframe.
Continuing the trend of more community-oriented development is the number of large mixed-use projects underway. Notable projects in the Southwest and Southeast include the 50,000-square-foot UnCommons project; Phase I (57,357 square feet) of the Bend; and the 300,000-square-foot Village at St Rose Parkway. These projects are being developed by Matter Real Estate, Dapper Development and SHEQ Properties, respectively. Being mixed-use, these developments will include a combination of retail space, housing, office and medical office.
Investment sales remain strong, accounting for more than $418 million in transactions, with an average of $380 per square foot. Notable sale transactions include Fashion Village at Boca Park for $63 million and Crossroads Towne Center for $56 million. Buyers from Southern California have been an important factor in keeping the Las Vegas market strong, comprising a large segment of the out-of-state investor pool that accounted for more than 60 percent of recent closings. The average cap rate of 5.9 percent offered a return of 80 basis points above Southern California markets.
The retail trends we’re seeing in Las Vegas show an increase in demand for the construction of unanchored strip centers and a moderate decline in demand for large anchored centers. As the market grows — and the previous availability of land continues to diminish — these trends will likely accelerate. Overall, we see a strong retail market across most sectors with low vacancy, substantial rent increases and continued investor demand.