Las Vegas’ real estate market, after getting battered by the recession, had one of its busiest years in a while in 2014.
Investors built retail, apartment and office projects in the suburbs, the housing market stayed volatile and new projects were proposed and took shape along the Strip.
What lies ahead? Here’s a rundown of what happened in 2014, and what insiders expect this year.
After hitting bottom, home prices rose at one of the fastest rates nationally in recent years as investors paid cash, sight unseen, for low-priced houses to turn into rentals.
But now, with fewer bargains out there, investors are pulling back. They triggered a valleywide slowdown last year as more listings went ignored, sales volume dropped and prices rose at a much slower pace.
Real estate pros expect things to keep cooling in 2015. But with the market relying more on regular, mom-and-pop buyers, that could turn a slowdown into a slump, as many locals can’t get a mortgage because of tighter lending requirements and past bankruptcies, foreclosures or short sales.
Meanwhile, homebuilders had a topsy-turvy 2014.
Sales totals dropped hard as would-be buyers, saddled with financial woes and sticker shock, backed off. Through November, sales volume was down 20 percent year-over-year in Southern Nevada, prices were flat, and builders pulled fewer construction permits.
All told, there’s little reason to feel “warm and fuzzy” about 2015, Home Builders Research President Dennis Smith recently said.
But even as business slumped, developers laid out plans last year to build big. They revived massive projects that were derailed during the downturn including 1,700-acre Skye Canyon, in northwest Las Vegas; 2,700-acre Park Highlands, in North Las Vegas; and 1,900-acre Inspirada, in Henderson.
In 2015, developers likely will sell land there to homebuilders. But don’t expect a surge of new subdivisions anytime soon.
These days, builders typically break ground on a house only after they find a buyer. Given the current slowdown, getting a rush of customers at every project seems all but impossible.
The biggest story in Las Vegas’ retail sector last year was the opening in October of the long-delayed Downtown Summerlin, the 1.6 million-square-foot retail and office complex at Sahara Avenue and the 215 Beltway.
Previous owner General Growth Properties stopped construction in fall 2008 amid the national economic meltdown, leaving a steel skeleton off the freeway. Current owner Howard Hughes Corp., a spin-off from General Growth, resumed work in 2013.
The mall opened with a four-day extravaganza of fireworks, live music and food trucks. As of a few months ago, 69 percent of the retail space had been leased.
Meanwhile, Ikea announced plans last year to open its first furniture superstore in Las Vegas. The popular Swedish retailer is slated to open in summer 2016 at Sunset Road and Durango Drive, in the southwest valley.
Other retailers taking space around the valley include discount clothing shops, dollar stores and quick-service restaurants, brokers say.
However, shopping centers also got hit with grocery-store closures, which could lead to a big drop in sales for other retailers in the plazas because of decreased foot-traffic.
Albertsons closed three locations last year. Also, Food 4 Less executives announced they were pulling the discount grocer out of Las Vegas by early this year.
They planned to close eight locations in the valley and convert six others to Smith’s Food & Drug stores. Both brands are owned by Kroger Co.
Despite some progress, Las Vegas’ office market is arguably the most-struggling aspect of the valley’s commercial real estate industry.
Leases are being signed, investors are buying buildings and some office-users are expanding. But overall, the market, which was vastly overbuilt by speculators during the boom years, has a glut of empty space and flat rental prices.
The vacancy rate was roughly 19 percent in the third quarter of 2014, down from 21 percent a year earlier, and average asking rents have been stuck at about $1.87 per square foot since late 2012, according to Colliers International.
The office market’s recovery “is not pretty, but it is a recovery of sorts,” John Stater, Colliers’ Las Vegas research manager, said in a report last fall.
Sales prices, for instance, are not even close to those of the boom years, but they are rising for high-quality buildings. And while landlords haven’t cut back on the pot of money they give tenants for interior build-outs, some larger property owners are either raising rents or not budging much from the asking price, said broker Dan Palmeri, a director with Cushman & Wakefield Commerce Real Estate Solutions.
In recent years, tenants jumped at the chance to move into higher quality office space at bargain prices. So now, even though Las Vegas’ vacancy rate is high, “quality space is few and far between,” Palmeri said.
At the same time, development is a fraction of what it used to be but hasn't stopped.
Perhaps the most notable office property built last year was the nine-story tower at Downtown Summerlin.
As of a few months ago, the tower was just 25 percent pre-leased, according to Howard Hughes.
However, the landlord hopes to soon finalize deals that would bring the occupancy to 50 percent and aims to have the building 70 to 80 percent filled by the end of this year, said listing broker Randy Broadhead, a senior vice president with CBRE Group.
The tower’s asking rent is $3.10 per square foot, well above the market average.
Construction is finished, but the first tenants won’t move in until April 1, Broadhead said.
Much of the ground-up construction on the Strip last year involved retail projects.
The Linq promenade outside the Flamingo opened, and other projects underway included Grand Bazaar Shops, in front of Bally’s, and a three-story shopping center at Treasure Island.
Investors haven’t given up on the corridor’s main cash cow, though.
Australian casino mogul James Packer and former Wynn Resorts executive Andrew Pascal acquired the former New Frontier site in August through foreclosure and announced plans for a new resort. They did not release project details at the time but said they expect to start construction in late 2015 and to finish in 2018.
Plans for sports arenas also advanced, even though developers haven’t signed any teams. MGM Resorts International and sports giant AEG broke ground in May on a 20,000-seat arena just off the Strip. Also, former UNLV basketball and NBA player Jackie Robinson received county approvals in August for his $1.4 billion project on the north Strip.
Robinson’s plans have called for a 22,000-seat arena with retractable roof, a 44-story hotel and 16-screen movie theater, as well as nightclubs, a grocery store, ice rink and movie-production studio — a colossal undertaking for a first-time developer.
Overall, with megaresorts on the drawing board but not under construction, including Genting Group's Chinese-themed property on the north Strip, “there really isn’t that much excitement in the market, in terms of development,” said Brent Pirosch, director of gaming consulting for CBRE’s global gaming group.
The north and south ends of the Strip still have plenty of vacant land, but Pirosch expects them to sit for a while until developers see how new projects on the resort corridor fare.