Coldwell Banker Premier Realty

A few thoughts on Southern Nevada


Inflection points, favored asset classes, new homes and local challenges
Posted: April 23, 2014 by John McClelland

Inflection Points

For those of you who have lived in or visited Las Vegas in the past few years, the impact of the recession has been quite obvious. For those who have been to Las Vegas recently, there are now some very bright spots in the regional economy that are also obvious. Just several years ago, one could drive down nearly any street in a residential neighborhood and see for-sale signs on at least one home. Things are far different today and while listing inventory is significantly higher than one year ago, the levels are still reflective of a sellers’ market in many key price points. 

Construction has also rebounded somewhat and mostly in some high-profile projects such as Caesars’ The Linq, which contains the High Roller observation wheel and many restaurant and retail options. In Summerlin, Howard Hughes is making good time in the construction of The Shops at Summerlin, which has a significant amount of pre-leases. The recently opened Cromwell and the forthcoming SLS are encouraging projects on the strip.

A Top Asset Class

Las Vegas multifamily, particularly Class A buildings, are in high demand by both high net worth and institutions. Occupancies in Class A also remain strong with decent fundamentals on the horizon. 

New Homes

The future of Las Vegas housing appears to be concentrated in three major areas, Park Highlands in the north, Cadence in Henderson and Kyle Canyon in the Northwest, which will replenish some of the Providence supply once that is absorbed. While Las Vegas added about 7,000 new homes last year, it is unlikely that we will add much more than that figure in 2014 as there are some natural limiters including finished lot supply and affordability as well as some backlogs in some of the municipalities. 

Challenges

Las Vegas has experienced an inflection point in visitor volume (from a couple of years ago), the job market, construction and home sales (with the trough in 2007). However, there are substantial headwinds going forward. Economic diversification remains a difficult task for Southern Nevada and one in which we would enjoy playing a role in. A recent report by RCG Economics and commissioned by the Las Vegas Global Economic Alliance analyzes deficiencies in the area of large industrial projects. Southern Nevada is characterized by smaller industrial buildings smaller than 100,000 square feet. Problematically, while Nevada is often considered a superior state in which to form a business due to its tax climate and more affordable housing relative to California, the market lacks large industrial buildings. 

The study confirms our own experience with relocating California firms, whom prefer not to perform a build-to-suit project because of the management expense in doing so. Land that lacks nearby water/sewer, along with entitlement, hydrology and soil studies are cites as large challenges to development. While some studies have quantified the amount of industrial zoned land, few persons outside of development or local government understand that many of these parcels are two small or of disparate ownership, requiring assemblage. The RCG study finds that because of a lack of availability, slow approvals and often a limited supply of realistic land, Las Vegas has lost out on nearly 9,000 jobs. We recommend a perusal of the RCG study, which can be found here: http://www.rcg1.com/wp-content/uploads/2014/04/2014-4-10-LVGEA-Industrial-Land-Survey.pdf

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