As someone who has spent most of his adult life working in commercial real estate in Southern Nevada, I often find myself explaining to others why they should care about my industry. The short answer is that as commercial real estate goes, so goes the overall economy.
We all know the Great Recession hit Las Vegas harder than most places. And few industries felt more of this pain than commercial real estate. For proof, look no farther than the nearest half-finished shopping center or office building.
Recent reports suggest we might finally be seeing some light at the end of this tunnel. According to the National Association of Realtors, the market is starting to improve nationwide, and commercial real estate professionals are regaining confidence.
Most members of the Commercial Alliance Las Vegas seem to share that sentiment.
NAR recently released its 2013 Commercial Member Profile. It shows that annual income, transactions and sales volume have all increased over the past year for commercial real estate professionals. NAR members who practice commercial real estate reported a median annual gross income of more than $90,000 in 2012. This is the highest level since 2008 and is more than $4,000 above the 2011 figure.
NAR Chief Economist Lawrence Yun recently pointed out that vacancy rates are falling and commercial rents are gradually rising nationwide.
As with the housing market and other areas of the economy, Las Vegas has lagged the rest of the country in bouncing back from the recession. But fortunately for those of us who make our living in this industry, we’re starting to see some bright spots here, too.
Vacancy rates for office space are still hovering around record levels. For example, as of March 31, CB Richard Ellis reported the vacancy rate for Class A office space in the Las Vegas area was 29.4 percent. But even the local office market is showing signs that it has hit bottom and is on the road to recovery.
One example of this gradual rebound came in early July, when it was reported that the stalled mixed-use project formerly known as Manhattan West is being finished by new owner the Krausz Cos. Inc., which is calling it The Gramercy. The company spent $20 million in June to buy the 20-acre project in the southwestern part of town, announcing that it plans to spend an additional $30 million to finish its office, residential and retail components. As with the announcement that construction would resume on the previously stalled Shops at Summerlin shopping mall, this is a great sign for our local industry and economy.
As NAR points out, commercial real estate is the basis for much of the growth in the American real estate industry and economy. This is especially true in Southern Nevada, where real estate has traditionally trailed only the gaming and tourism industries in economic impact. Any improvement in commercial real estate will provide a much-needed boost to our overall economy.
We’re not out of the woods yet. Remaining hurdles on the road to recovery include too many commercial real estate projects still struggling to find financing.
According to NAR’s Commercial Real Estate 2013 Lending Survey, members reported a significant disadvantage when it came to financing for buyers of properties under $2 million, which makes up 85 percent of all commercial clients NAR members handle. These small business are typically financed by private investors or local and regional banks. Fifty-two percent of commercial members reported they had commercial transactions fail in the past year due to a lack of financing. We’ve seen our share of that here, too.
Recently proposed legislative and regulatory initiatives, as well as the regulatory uncertainty of financial institutions, are accounting for the lack of capital in commercial lending for smaller properties.
Like our colleagues at NAR, Commercial Alliance Las Vegas leaders believe in improving the flow of capital to commercial real estate. With more liquidity in the market, conditions undoubtedly would improve faster here in Southern Nevada.
By encouraging and facilitating investment and promoting the sale and lease of commercial space, people in our profession are playing a big role in revitalizing our local economy. This, in turn, supports thousands of jobs locally and millions nationally.
That’s why we should all care about this industry.
Tedd Rosenstein is the 2013 president of the Commercial Alliance Las Vegas, the commercial real estate division of the Greater Las Vegas Association of Realtors.