City 42nd out of 44 metro retail markets
By HUBBLE SMITH | April 1, 2010
(LAS VEGAS REVIEW-JOURNAL) Soft job growth and continued weakness in the housing market are keeping Las Vegas near the bottom of a national retail index, a report from Marcus & Millichap real estate investment firm showed.
Las Vegas ranked No. 42 among 44 metropolitan retail markets, unchanged from a year ago.
Washington, D.C., held the top spot, followed by San Diego, San Francisco and New York.
Marcus & Millichap regional manager John Vorsheck said bargain-seeking investors are making offers on lender-owned assets they see as attractive in Las Vegas. Fort Apache Road has become “foreclosure central” for retail properties, he said.
As competition heats up for those assets, some buyers may start to look at traditional listings in favorable Las Vegas retail corridors that still offer a discount, Vorsheck said.
Marcus & Millichap is listing the Harley-Davidson dealership and 24 Hour Fitness center at 2605 S. Eastern Ave. for $17.9 million, or $172 a square foot.
“It’s trading off its peak value,” Vorsheck said. “You can buy into deals of 200 to 300 basis points difference (in capitalization rates) than what they were trading at their peak. People are looking at that and seeing opportunity.”
The 104,000-square-foot building is occupied by both tenants, with Harley-Davidson’s lease expiring in 2013 and 24 Hour Fitness’s in 2016. Assumable financing of $10.9 million is available at 5.69 percent interest .
New York-based Carlton Exchange was hired to auction an 18,000-square-foot strip center near McCarran International Airport’s rental car center. It has a convenience store, restaurant and the nearest gasoline station to the rental car drop-off.
The seller is willing to take 50 percent to 60 percent of the previously listed $9.1 million price, said Scott Stay, asset manager for Carlton Group in New York.
Stay said he manages a $1.4 billion portfolio of about 60 real estate-owned, or bank-owned, assets for Carlton, including 560,000 square feet of air rights at the entrance to Disneyland in Anaheim, Calif., valued at $250 million. It’s entitled for a hotel or time share.
Weak retail sales will force more stores to close in Las Vegas, pushing retail vacancy to 12.1 percent, an increase of 120 basis points, Marcus & Millichap projected in its 2010 national retail report. Vacancy jumped 240 basis points in 2009.
Asking rents are forecast to drop 2.6 percent to $21.26 a square foot, while effective rents, which include concessions, will fall 5.7 percent to $17.62 a square foot.
Landlords are under pressure to offer concessions along newer retail corridors in outlying areas of the Las Vegas Valley where retailers built ahead of real household growth, the report said.
“The numbers aren’t so good, but there’s a picture within those numbers that shows retailers are still interested in having a presence in Las Vegas,” said Bill Dunbar of Dunbar Commercial.
He recently represented Oklahoma City-based Hobby Lobby in purchasing a 51,296-square-foot building in the Whitney Ranch Shopping Center, a former Vons grocery store that had been vacant for six months. It’s the company’s first location in Las Vegas.
Dunbar also brokered the $4.8 million purchase of a 37,700-square-foot building for Ashley Furniture at Galleria at Sunset mall. It was occupied by Linens ‘n Things.
Total Wine & More leased nearly 22,000 square feet at Warm Springs Road and Stephanie Street, formerly Shoe Pavilion. It follows Total Wine & More’s first store opening in Boca Park.
These transactions are a good indication that the retail market is starting to improve, Dunbar said.
“I think it’s fractured in the sense that quality retailers are still expanding their market share and taking advantage of vacancies and other retailers are not meeting with as much success and don’t have the budgets to expand,” he said.
Dunbar said prices are down 35 percent on prime retail box locations in Las Vegas, creating opportunities for regional and national retailers to reposition themselves at an affordable price.
Grocery store-anchored centers in areas such as the Summerlin community should weather the downturn relatively well as financially stable retailers lease discounted space to establish a presence, the Marcus & Millichap report said.
The report also said that although the opening of CityCenter on the Strip was a source of employment early in the year, those positions will be offset by construction job losses. Payrolls will expand modestly this year, adding 2,500 spots, a 0.3 percent increase. Last year, employers cut 66,640 jobs.
“The national economy has begun to recover, though leisure travel will be limited this year, leading to light visitor volume and weakened employment in the Las Vegas tourism industry,” the 2010 national retail report said.