When people ask me how the local real estate business is doing, I try to summarize what can be a long story—especially when it comes to commercial real estate.
For the past two years, my answer has been some variation of “pretty good,” or “surprisingly well.”
Whether we’re talking about the local housing market or what’s happening in the retail, office and industrial sectors of commercial real estate that I work in daily, things have generally been on the upswing the past couple years.
Angelina Scarcelli, President of Commercial Alliance Las Vegas, poses for a photo Monday, Feb. 14, 2022.
By most measures, these sectors have been performing well this year, even if the growth rates are a little slower than they were in 2021.
But with inflation and interest rates rising, and fears of a recession growing, winds of change are blowing across the real estate landscape.
This was a hot topic at our most recent meeting of the Commercial Alliance Las Vegas, where CALV leaders and commercial real estate professionals and companies shared recent examples of deals being delayed or threatened due to nervous buyers or tenants seeking lower rates or prices to reflect changing conditions.
With recent headwinds in our economy, such apprehension is understandable.
We’re seeing a similar shift in the residential real estate market. Las Vegas Realtors (LVR) statistics suggest the local housing market is finally starting to slow down after local home prices set record highs almost every month for two years.
For the first time since April 2020, the median price of an existing single-family home sold in Southern Nevada actually went down from one month to the next, dropping by a modest 0.4% from May to June.
That median home price of $480,000 is still up 22% from $395,000 one year ago.
We’re also selling fewer homes here this year than we did in 2021, which was a record year for existing-home sales.
And we’re finally starting to see more homes available for buyers. By the end of June, LVR reported 5,746 single-family homes listed for sale without any sort of offer. That’s up 134.1% from the same time last year. Likewise, the 1,340 condos and townhomes listed without offers in June represent a 133% jump from one year earlier.
The apartment market is also showing signs of cooling. While local rents aren’t going down just yet, the Nevada State Apartment Association reported this month that rents are now rising about half as fast as they were one year ago.
Rising interest rates are certainly playing a part in all this. At the same time, common sense tells us things can’t keep climbing forever.
If we are possibly headed for a slowdown, at least we’re coming from a pretty positive place. The most recent quarterly statistics from Colliers Las Vegas and Research Manager John Stater show pretty solid numbers across the board.
If there’s one sign of softening through the second quarter, it’s in the local market for office space.
Then again, as Stater points out, with more people working from home, the effects of a global pandemic and other challenges, the office sector has been dealing with headwinds “really for the past decade.”
A better and more relatable example for most of us is the retail market.
Maybe you’ve noticed that your favorite restaurant isn’t open for lunch anymore or is closed on certain nights, likely because of staffing challenges and other factors. Your dry cleaner or favorite stores may have recently reduced business hours.
Still, the most recent report from Colliers shows relatively strong demand and declining vacancy rates for local retail space during the second quarter.
In fact, Colliers reported that “Southern Nevada’s retail market had its strongest quarter since the fourth quarter of 2021.”
I recently listened to a podcast produced for people like me who’ve earned the Certified Commercial Investment Member (CCIM) designation. It features Martha Peyton, managing director and global head of real assets research at Aegon Asset Management, talking about how commercial real estate has traditionally been viewed as a good investment in times of inflation.
The podcast sums it up this way: “Long considered a hedge against inflation, commercial real estate continues to face challenges in the face of COVID-19 and war in Ukraine, but opportunities are available in all property sectors for smart, knowledgeable investors.”
While the sands may be shifting and a possible recession may be the latest challenge facing the nation, we have always been resilient in Southern Nevada when faced with times of uncertainty.
Angelina Scarcelli is the 2022 president of the Commercial Alliance Las Vegas, one of the largest organizations in Nevada for commercial real estate professionals. A Certified Commercial Investment Member and Certified Property Manager, Scarcelli is managing director of real estate management services in Nevada for Colliers International.
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