Across the street from Las Vegas City Hall, near Goodfellas Bail Bonds (“Free ride home, free T-shirt, free hug”) and Desert Manor apartments (“No guns, knives or weapons allowed on premises”), a cluster of pricey, high-quality office buildings might rise from the ground.
Forest City Enterprises has drawn up plans to develop three office buildings on what are now fenced-off lots between City Hall and a Regional Transportation Commission transit center. The roughly 507,500-square-foot project is called “The Grid.”
The buildings would be six to nine stories tall and offer “abundant” natural light and on-site retail and restaurants, according to a marketing brochure. The surrounding area, it says, has housing, eateries, public transit and entertainment all “within walking distance.”
“It’s the full package,” the brochure says.
For now, the plans exist only on paper, and it’s far from certain that Forest City will build anything. Also, most office users downtown flock to cheaper buildings, and unlike other big cities, Las Vegas doesn’t have a large crop of big office users or a downtown-centered market.
Brokers and industry analysts expect Forest City to build in phases and to break ground only if it signs tenants in advance. Still, some questioned why the company was considering such a big project in an office market that, overall, remains badly bruised by the recession.
“I don’t know what the thinking is on 500,000 square feet of this stuff,” said John Stater, Las Vegas research manager for brokerage firm Colliers International. “But then again, I’m not a billionaire, so maybe I don’t know what the hell I’m talking about.”
Downtown has the lowest vacancy rate of any submarket in the valley, due to its cluster of law firms and government agencies. And since investors haven’t built much space there over the years, some tenants might jump to the nicer, albeit more expensive, new property, insiders say.
Meanwhile, Forest City isn’t the only developer considering an office project downtown. The Molasky Group of Cos. is pursuing plans to construct at least 250,000 square feet of space in Symphony Park, just west of City Hall.
The Grid’s listing brokers with Newmark Grubb Knight Frank in Las Vegas did not return calls seeking comment.
No project plans have been submitted to the city, and no permits have been issued, said Jace Radke, city government spokesman.
Cleveland-based Forest City has close ties to the valley. It developed Las Vegas City Hall, owns the Galleria at Sunset mall in Henderson and manages Town Square, the 93-acre retail and office complex south of the Strip.
The company is “actively marketing to prospective tenants and/or outright purchasers, but I don’t have any additional information to share on the process,” spokesman Jeff Linton said of The Grid, in an email.
The project’s timeline “will be dictated by the market,” he said, as the company will push ahead “when there are firm commitments from tenants or buyers.”
“That’s really all I have at this point,” Linton said.
Downtown — which has 12 percent of the valley’s office space — has a 12 percent vacancy rate and average monthly asking rents of $1.88 per square foot, compared to an 18.5 percent vacancy rate and $1.91 in average rents valleywide, according to Colliers.
But Class A — or highest quality — space is 20 percent vacant downtown, with average rents of $2.61. That compares to 9.9 percent vacancy for Class B offices, which have average rents of $1.47, and 9.6 percent for Class C, with rents at $1.45, Colliers says.
The Grid and Molasky’s project are both Class A.
There wasn’t as much office development downtown the past few decades as there was in the rest of the valley, but if The Grid opens, existing tenants in the area might vacate their space for the new buildings, said broker Brad Peterson, a senior vice president with CBRE Group.
However, with asking rents for The Grid hovering around $3.25 to $3.50 per square foot, tenants will be those who “really want to be downtown in a Class A image,” he said.
“There’s a few of those tenants, but I don’t know how many,” Peterson said.
Developers flooded the valley with office buildings during the boom years last decade, and properties emptied out during the recession as companies laid off workers en masse or shut down altogether. There are plenty of empty offices these days and, overall, a relatively small number of users who gobble up whole buildings or other large amounts of space.
All told, the number of tenants who are willing and able to pay top-dollar for The Grid is small, RCG Economics founder John Restrepo said.
“I don’t think there’s a demand for it,” said broker Dan Palmeri, a director with Cushman & Wakefield Commerce Real Estate Solutions. “If they built it, would people be more interested in moving downtown? A little bit more.”
Investors last decade bought the majority of five blocks downtown and then sold a 60 percent stake to Forest City. The group reached an agreement with the city to build City Hall on a portion of the site; to develop a 1,000-room hotel-casino in what’s now called Symphony Park; and to develop 900,000 to 1 million square feet of Class A offices and up to 300,000 square feet of retail on the remainder of the holdings, city documents show.
The developers traded the land underneath City Hall for the city-owned parcel in Symphony Park.
Radke, the city spokesman, said there are no pending applications or permits for the casino. He also confirmed that The Grid, despite being smaller than what the development agreement previously called for, comprises the third aspect of that deal.
Forest City may not stop there, however. The marketing brochure for The Grid labels a block just south of the project site as “future development.” The block is home to Desert Manor apartments and an “adult superstore.”
In the meantime, another developer is moving ahead with plans for new office space, as well.
The City Council on Wednesday approved an exclusive negotiating agreement with the Molasky Group for its project. According to Radke, Molasky President Rich Worthington said his group was competing for tenants with other states and he planned to have multiple users.
Worthington did not respond to requests for comment.