The office market in Las Vegas has tipped in favor of owning rather than renting for small-business owners such as Clay Bloxham, of PayPros payroll accounting service.
Bloxham recently bought a freestanding, 4,100-square-foot office condo at 5225 S. Durango Drive for about $390,000, working out terms with Bank of Nevada, the property's previous owner.
Bloxham figures to save about 55 percent from what he was paying in rent for similar-sized office space at Dean Martin Drive and Warm Springs Road.
"The real thing it came down to is I didn't want to lay off any of my hard-working employees," Bloxham said Tuesday as he watched workers paint the walls of his new office. "We started looking at how to cut costs and expenses."
Bloxham said he looked at six different properties, focusing on the Beltway corridor between Durango Drive and Gibson Road to make an easier commute for him and his eight employees.
Even with office vacancies in Las Vegas at 25 percent and asking rents falling under $2 a square foot, it makes better financial sense for some small businesses follow Bloxham's lead, said Zoltan Hollo, broker for Insight Realty Associates.
With prices and interest rates low, an owner can control costs and gain tax breaks from depreciation, he said.
Hollo said he's selling smaller "gray shell" offices of 10,000 square-feet or less for about $80 a foot in the southwest Las Vegas Valley. Improved buildings, or those with finished interiors, are about $125 a square foot.
"Wherever they can buy properties, they buy," Hollo said. "It's not like we have that much office available, even with 25 percent vacancy. When you look at it from the perspective of size and location, it's not like sliced bread. You can't just go to the store and buy whatever kind you want."
Going forward, there will be more real estate-owned, or bank-owned, office properties coming on the market, said Dave Dworkin, research analyst for Grubb & Ellis in Las Vegas.
While banks continue to work with owner-users of smaller, mostly vacant office buildings, special servicers are trying to unload larger income-producing properties to the right investor, Dworkin said. As more of those properties sell there will be less competition from distressed office buildings and prices will slowly return to realistic levels, he said.
Jeremy Foley of Gatski Commercial said the benefits of renting versus buying office space are much the same as they are in residential real estate. There are certain tax advantages to leasing because the full amount of expenses can be deducted from taxable income, he said.
Lease rates have come down substantially in the middle- and lower-class office properties, but they're holding steady at $2 to $2.25 a square-foot for Class A properties, Foley noted.
"I've sold some income-producing properties fully built-out for $40 a foot, but they're going to need $500,000 of work and that scares some people off," he said. "It's discounted off the construction cost, so if you have to put another $40 a foot into it, you're pretty close to market value."
Bloxham of PayPros estimates he'll spend about $15,000 on new paint and carpet for his office, which he hopes to move into by the end of March.
"I know it's not for everyone to buy their building," he said. "We looked at (Small Business Administration financing), but the bank's terms made more sense."
Contact reporter Hubble Smith at firstname.lastname@example.org or 702-383-0491.