Las Vegas commercial market to spur healthy housing
It’s no surprise that houses for sale in Las Vegas are not available in abundance, and Sin City suffered quite a bit during the housing bubble burst. Similarly, the market witnessed a blow to commercial real estate in a city where revenue is almost primarily from tourism. Experts say the building just opened at a bad time, but owners MGM Resorts International wanted to take part in boosting the local economy. However, as big name companies like Zappos are moving their headquarters downtown to stabilize and revitalize, the housing market is expected to bounce back.
During the peak of the Las Vegas’ economy, an $8.5 billion community called CityCenter was built, but it didn’t open up until after the recession. After five years of design and construction, the 67-acre project opened its doors in late 2009. As one of the largest privately financed developments in the country, CityCenter added about 5,900 hotel rooms and 2,400 high-end condos to the market. At the time, the building contributed to a 5 percent increase in hotel capacity, but the number of tourists dropped about 2.85 million since 2007. The center also included an upscale shopping center with the potential for more than half a million square feet of luxury shops, which remains 12 percent vacant today.
After the CityCenter opened up with a less-than successful start, more than 1,350 units were turned from condos to hotel rooms, and roughly 70 percent of the 150 sold united are leased out to vacationers. Today, most of the hotel rooms are filled, but they are offered at a much lower rate than initially expected.
“When CityCenter opened, Las Vegas was at the depth of the recession. The initial forecast room rates were unachievable at that time, and a lower-than-market average occupancy was experienced.” Michael Mixer, a managing partner of Colliers International-Las Vegas told The New York Times. Mixer also mentioned that as the company discounted their hotel rates, “they achieved a higher occupancy at the expense of lower-tiered properties, within the MGM family and others. This was a flight to a higher quality when given similar price points.”
Right now, commercial real estate in Las Vegas is bouncing off the bottom and beginning to stabilize, according to the Reno Gazette-Journal. Throughout the state, recent commercial real estate deals shed light on the gloomy market. In the city, the long-awaited projected called Shops and Summerlin Centre is restarting construction after being stalled. Other areas of the state are witnessing similar booms such as the opening of a data center for Apple in Reno and Sparks. More companies are moving into the region, and business owners are becoming increasingly attracted to the low rent for office space and are taking full advantage of it. With these additions, more people are relocating, thus boosting the housing market.
Commercial real estate is also getting a nudge from seasonal companies renting out vacant retail space. At the same time that many currently standing brick-and-mortar retailers are filling job openings, other businesses are opening up. In Las Vegas, retail vacancy has decreased from 15 percent to 10 percent with the help from temporary renters. This is also giving the local economy a slight boost, and can inevitably cause a long-term impact on the market. Real estate expert Kit Gaski told Las Vegas CBS affiliate KLAS that even if it is a temporary job, each one that is created causes a bit of excitement and buying power and ends up trickling down to other buyers and tenants.