Even with the retail market in peril and the housing market crawling around the bottom, Home Depot plans to open its 12th store in the Las Vegas Valley on Nov. 19, a 140,000-square-foot warehouse at Deer Springs Town Center in North Las Vegas.
The $20 million investment in land and construction costs seems risky, considering the sparse number of homes in the area around North Fifth Street and the Beltway. But the Atlanta-based corporation looks at the potential return on investments more than population density, Home Depot Western Division President Joe McFarland said.
"I think for a market like this, you've got to look at North Las Vegas and the growth that's already here and what's going to come," McFarland said Wednesday during a tour of the new store with local managers. "It makes sense to put it in here. We're looking three, four, five years out. What's this area going to look like in 2017?"
When selecting a store location, Home Depot does a pro forma sales estimate for one, three and five years, McFarland said. While times have been tough for everybody over the past 18 months, Las Vegas has been one of the strongest markets in the country over the past decade, he said.
Home Depot's business remains down for the past two or three months, but not as bad as it was for the first six months of the year, said McFarland, who oversees about 500 stores in the West.
"It's still negative, but it's less negative, and less negative is the new positive," he said. "It's not good, but it's better."
McFarland said he looks for things to turn positive by the second quarter of next year.
Home Depot has hired most of the 100 employees needed for the new store, though about 15 warehouse and office positions remain open, store manager David Cabrera said. He interviewed more than 300 applicants.
The retailer employs more than 1,800 people at its 12 stores in Las Vegas and one in Pahrump.
North Las Vegas ranks among the highest foreclosure areas in the nation, which means many of those homes will need substantial repairs and remodeling when they're purchased, Cabrera said.
"Sometimes all the fixtures, the cabinets, the sinks have been taken. That all needs to be replaced," he said.
Home Depot devised a strategy for areas with high foreclosures, McFarland said. For example, the North Las Vegas store sells 40-gallon water heaters for $278 and five-gallon buckets of white latex paint for $20.
First-time homebuyers are completely different than investors who intend to rent a home and then "flip" it for a profit, McFarland said. They're likely to spend more money on home improvements.
Home Depot has dedicated a section of the new store for holiday sales, including a roll of 250 multicolored LED Christmas lights for $25. Eight sets of the lights can be connected together -- stretching one-eighth of a mile -- and plugged into one outlet, McFarland said.
While there appears to be a nascent national recovery, Southern Nevada's commercial real estate markets continue to be in a severe downturn, John Restrepo of Restrepo Consulting Group said.
He's reporting 9.2 percent vacancy for the anchored retail market, or more than 3.9 million square feet of empty space. A large amount of space was brought on the market during the boom years, much of it driven by credit availability rather than solid market fundamentals, he said.
Home Depot probably wanted to get a jump on the competition in the newer areas of North Las Vegas, Restrepo said.
"If they get in now, they stop everyone else. If you have the resources now and you're willing to put up with below-average performance for a few years, you potentially block the competition," he said.
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