Construction is seen Tuesday for the Town Square project by Centra and Turnberry on 100 acres near Las Vegas Boulevard South and Sunset Road. The dollar value for commercial building permits in June jumped 154.4 percent from the same month a year ago to $179.6 million. Photos by Ronda Churchill. The Town Square project near Las Vegas Boulevard South and Sunset Road is one of many commercial projects that are thriving in the Las Vegas area as residential building permit valuation falls 19.7 percent. Click image for enlargement. Graphic by Mike Johnson.

While the cooling residential real estate market has dampened the economic outlook in Las Vegas, the commercial sector is booming.

The dollar value for commercial building permits in June jumped 154.4 percent from the same month a year ago to $179.6 million, even though the number of permits remained about the same, a UNLV research center reported. Residential building permit valuation fell 19.7 percent to $437.5 million.

The strength of commercial development, combined with growth in both taxable sales and gaming revenue, was not enough to prevent another monthly decline in the Southern Nevada Index of Leading Economic Indicators, which slid to 132.26 in August. It was 132.53 in July.

"The large positive change in commercial building permit valuation is given a small weight in the index, in part because large positive swings often are followed by negative swings," said Keith Schwer, executive director of the Center for Business and Economic Research at University of Nevada, Las Vegas. "That is, the estimation scheme gives greater weight to sustainable movements."

The index is a six-month forecast from the month of the data (June), based on a net-weighted average of 10 series after adjustments for seasonal variation.

The accompanying Review-Journal chart includes several of the index's categories, along with data such as new residents and employment and housing numbers, updated for the most recent month for which figures are available.

Six of the 10 economic indicators contributed negatively to the August index, Schwer said.

"All in all, the Southern Nevada index foretells slower growth into 2007, a reflection of strengths and weaknesses competing with each other at cross-purposes," he said.

Recent economic data in Nevada and nationally point to moderating economic growth, said Jim Shabi, an economist for the Nevada Department of Employment, Training and Rehabilitation.

"The combination of rising interest rates and high energy prices have begun to take at least a modest toll on economic activity," he said.

Although signs of a slowdown are apparent, Shabi noted that most of the economic indicators are still rising, including gaming revenue and taxable sales, which posted increases of 11 percent and 8.7 percent, respectively. Nevadans have become spoiled by exceptional economic growth over the past two decades, he said.

While Nevada is facing a period of moderation, billions of dollars of new investment are planned throughout the state, from power plants in White Pine County and expanded mining operations in rural counties to new hotels and luxury condos in Las Vegas, Shabi said.

The employment picture is also bright. Nevada businesses created 6,400 private sector jobs in July and Southern Nevada's total employment grew 5.9 percent from a year ago to 923,400.

Jeremy Aguero, principal of Applied Analysis, a research firm in Las Vegas, said the No. 1 economic indicator is population growth, which continues to outpace national and regional averages. Since 1950, the local population has doubled nearly every decade. Nine people move to Las Vegas each hour.

"Growth itself has become one of Las Vegas' core industries," Aguero said.

All sectors of the commercial market established new benchmarks recently with office, industrial and retail vacancy levels well below historical averages, he said. Through the first half of the year, all three commercial sectors continued to post healthy expansion and market absorption, with annual results likely to outpace 10-year historical averages.

Land prices are starting to affect the commercial markets, Aguero said; many projects have become financially infeasible given current rental rates.