Slumping economy hurts Las Vegas commercial real estate markets

Las Vegas commercial real estate markets have not escaped the turmoil of the national credit and housing crises, a third-quarter retail market report from CB Richard Ellis showed.

The retail market shows the strain of the economic downturn with steadily increasing vacancies and the first quarter of negative absorption, or the amount of new space taken by tenants, in a decade.

The vacancy rate ran 6.32 percent in the third quarter for nearly 59 million square feet of retail space in Las Vegas, up from 5.82 percent in the previous quarter and up 1.75 percentage points from a year ago, CB reported.

Asking lease rates have remained steady throughout the year, dropping a penny in the third quarter to $2.20 a square foot. Lease rates dropped 40 cents a foot in the northwest submarket and about a nickel in the Nellis and southwest submarkets.

There are some bright spots in the retail outlook for Las Vegas, including more location choices and more negotiating power for tenants, CB retail broker Penny Mendlovic said.

The market provides certain businesses with the opportunity to expand and take advantage of exceptional deals on both the lease and sales sides, she said.

Hispanic grocers have grown and that has affected traditional grocers, Mendlovic said. Specialty food stores such as the Buy Low market in the redevelopment area around Owens Avenue and H Street and Sunflower Markets in the southwest valley have found their niche in Las Vegas.

Fundamentals within the Las Vegas retail sector continue to wane and the impacts associated with a global financial crisis provide little relief in the near term, Applied Analysis research firm principal Jeremy Aguero said in his third-quarter retail market report.

Applied Analysis showed 6.3 percent retail vacancy in Las Vegas, compared with 6.1 percent in the second quarter and 3.7 percent in the same quarter a year ago. Asking rates dropped to $2.16 a square foot from $2.18 in the previous quarter.

Power centers, or larger centers anchored by big-box retailers, had the lowest vacancy rate of 3.7 percent, while neighborhood shopping centers had the highest vacancy at 8.5 percent.

Major completions during the quarter include Lake Mead Crossing anchored by Target in the southeast; Foothills Plaza anchored by Fresh & Easy; and Commerce Commons in North Las Vegas, also anchored by Fresh & Easy.

Retail employment posted a gain of 4,500 positions during the third quarter, a 2.6 percent increase from last year, Applied Analysis reported. It is likely that several of the recent retail closures have yet to be reported in the latest employment figures, Aguero said.

“Despite elevated vacancy rates, population growth continues, albeit at a slower pace, and a new bottom is expected in the coming quarters,” Aguero said. “Time will be the critical factor before Southern Nevada witnesses a material improvement in the commercial retail supply-demand equation.”

Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.