WESTERN SNAPSHOT, MAY 2007

Las Vegas Retail Market

Graski

Long known for its thriving entertainment and hospitality industries, Las Vegas is now becoming a retail hotspot as well, attracting many of the world’s most sought-after retailers and national tenants looking to capitalize on the tourism market and the substantial number of new rooftops. In addition to catering to the high volume of 38.4 million tourists visiting the city of lights every year, retail developers have looked past the lights to the area’s 2 million residents and 5,000 new residents that are moving to the Las Vegas Valley every month.

Retail employment reported a 4.3 percent growth rate, contributing 7,300 of the approximately 44,200 new positions in Las Vegas. The Las Vegas retail market currently comprises 285 retail centers totaling 44.3 million square feet of product. There is more than 5.2 million square feet of retail space under construction while 13.7 million square feet of retail space, including select regional and lifestyle centers, is in various stages of planning.

The demand for new retail product has outpaced supply with 787,000 square feet absorbed, driving annual absorption to 1.8 million square feet in the past year. With a healthy balance between supply and demand, the market still has a low vacancy rate of 2.5 percent.

Vacancy rates remain low after years of residential developers buying up land to meet the flourishing demand for housing. In the past few years, residential developers have outbid commercial and retail developers for a large portion of the available land. The slowing of the housing market may provide a more stable balance in the next year for retail developers to catch up to the recent population boom.

Some developers have avoided the high land prices altogether by developing projects on leased land, including Arroyo Market Square, McCarran Marketplace and Blue Diamond Crossing. Laurich Properties and EJM Development are developing the Arroyo Market Square, a 950,000-square-foot power center located off the Interstate 215 beltway at Rainbow. Completion is anticipated for fourth quarter 2007 or first quarter 2008. McCarran Marketplace, a 600,000-square-foot community retail center located at the intersection of Eastern Avenue and Russell Road near the McCarran International Airport, is currently being developed by Marnell Properties. Blue Diamond Crossing is a 600,000-square-foot retail development on Blue Diamond Road.

There are not as many mixed-use projects proposed, which shows developers reverting back to traditional retail developments. One of the only major mixed-use projects that will impact the market in 2007 is Town Square, a 1.1 million-square-foot mixed-use, lifestyle center. Centra Properties, in a joint venture with Turnberry Associates, is building the project. Town Square will be located at Sunset and Las Vegas boulevards, just south of The Strip.

Although The Strip contains a substantial amount of retail product for the 38 million tourists that visit the city each year, the southwest and northwest submarkets are currently experiencing the most development and planned retail product.

The previously mentioned Arroyo Market Square and Blue Diamond Crossing are both located in the southwest portion of the city, as are major developments built to cater to the massive growth experienced in this area of Las Vegas. There are many projects proposed in the northwest submarket, including Deer Springs Town Center, a 700,000-square-foot power center anchored by Target and The Home Depot and located near the I-215 and North 5th Street; and Deer Springs Crossing, a 300,000-square-foot Kohl’s-anchored shopping center located at North 5th Street and Deer Springs Way.

Currently, the most active developers in the retail market are Laurich Properties, Juliet Properties, The Montecito Companies, Turnberry Associates and EJM Development Company.

The most active national tenants in Las Vegas are Target and Kohl’s, which have been springing up in many submarkets across the Las Vegas Valley. A major new tenant in the market is United Kingdom-based Tesco, which will be entering the market this year.

There will be increased activity by tenants this year due to the need to meet the constrained demand for retail product and the healthy activity experienced by tenants throughout 2006. Taxable retail sales have been in excess of $3.24 billion and will continue to increase. Due to the slowing housing market, landowners may begin to look back to retail developers, softening the deal terms and speed at which transactions are expected to close. Retail sales prices may begin to level off, allowing retail development to flourish and catch up with the massive growth Las Vegas has witnessed in the past few years.

Kit Graski is a senior vice president at Voit Commercial Brokerage’s Las Vegas office.


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