Commercial market tilts to tenants

No matter how bad the economy gets, nobody wants a dirty, smelly dog.

That’s why Kathy Patterson decided to open Barking Dogs Self-Wash and Grooming at Cimarron and Blue Diamond roads in the southwestern Las Vegas Valley.

While many retailers are struggling to make payroll and expenses, Patterson saw an opportunity to expand her business. She also owns Barking Dogs Bakery and Boutique on Rainbow Boulevard.

The new Barking Dogs self-wash offers HydroSurge bathing tubs, nail trimmer and shedding tool rentals, absorbent towels and add-on colognes. Best of all, the staff cleans up the mess.

Patterson is among only a few business owners willing to invest in today’s market.

It’s not a bad risk for entrepreneurs who have always wanted to start their own businesses, but couldn’t afford the rent, said Kit Graski, retail broker for Voit Commercial in Las Vegas. Now they can pay $2,000 a month instead of $3,000 to $4,000 for the same space.

He said Las Vegas has absolutely switched from a landlord’s market to a tenant’s market.

A year and a half ago, rental rates were increasing and there was generally a “big bucket” of tenants chasing retail sites, Graski said. That pressure held rents up. Now a few tenants can choose from many sites, giving them the upper hand in lease negotiations.

“There’s not the demand there once was,” he said. “The national big-box tenants … most have put their plans on hold. There’s still a few moving around, taking second-generation space, but for new shopping centers and new space, most everybody put their plans on hold for the foreseeable future.”

Commercial real estate has taken a beating along with the housing market. Commercial mortgage delinquency rates have doubled in a year, vacancy has surged and foreclosures are looming.

Southern Nevada’s commercial development will be severely affected by foreclosures, real estate analyst John Restrepo of Restrepo Consulting Group said. The wave of commercial real estate defaults is gaining strength each month and will likely crest sometime in 2010, he said.

Troubled commercial real estate assets in Las Vegas jumped 72 percent from $4.7 billion in early 2008 to $8.1 billion in April, according to New York-based Real Capital Analytics. About one-fourth of commercial projects are in financial trouble, with apartment complexes experiencing the most difficulty.

Access to financing and economic uncertainty are cited as the biggest obstacles to recovery in commercial real estate, a May survey by Los Angeles-based LoopNet showed.

Forty-two percent of respondents do not expect commercial real estate sales transaction activity to pick up until 2010, while 26 percent do not expect recovery until 2011. One-third believe the market will start to improve this year.

“Our market benefited from a bigger upswing in the good times,” said Todd Manning, retail broker for Marcus & Millichap in Las Vegas. “We’re consequently suffering a bigger downswing and it’s going to take us a little longer to recover.”

Retailers are cutting inventories, cutting payrolls and cutting prices to survive, he said.

Some are negotiating lower rents with varying degrees of success. Fast-food restaurants are introducing “dollar menus” and lower-priced items to meet tight consumer budgets. Retailers that offer discounted products and services are definitely doing the best business in this economy, Manning said.

Nearly half (46 percent) of respondents to the LoopNet survey see access to capital as the most significant obstacle to recovery. Economic uncertainty, which in turn significantly influences asset pricing, was the second-most-cited obstacle at 29 percent.

“We can expect a very constrained credit and lending environment for some time,” Restrepo said.

Nearly one-fourth of respondents explicitly cited differences in pricing expectations between buyers and sellers as the most important obstacle to recovery. Although results were largely consistent across all three major participant segments, owners rate the importance of access to capital slightly higher and differing price expectations slightly lower than brokers or investors.

More than 1,500 commercial real estate investors, brokers and owners who use LoopNet’s online service responded to the poll, which was conducted May 7-21.

“The important thing people should know is that deals are getting done and tenants are leasing space,” Las Vegas office and industrial developer Jeff LaPour said.

He recently completed a seven-year lease of 23,000 square feet for KGA Architecture at LaPour Corporate Center near the Beltway and Flamingo Road.

“There’s activity and I think tenants are starting to recognize the opportunity they have to get value,” he said. “There’s more options for tenants to look at. It slows absorption and makes it a more competitive environment.”

Rod Martin, vice president of Majestic Realty, said he signed deals with Staples for 37,500 square feet of warehouse space and 5,600 square feet of office space in February and with Portfolio Recovery Associates for 30,000 square feet of office space in November.

He said he’s been successful in negotiating lease extensions with 80 percent to 90 percent of Majestic’s existing tenants without dropping rental rates or reducing the size of the premises.

“For what it’s worth, we could likely have done a few more industrial deals if we were willing to drop our rates more,” Martin said.

Developers are on course to build 2.2 million square feet of new retail space in Las Vegas this year, down 62 percent from 5.9 million square feet in 2008, Marcus & Millichap’s Manning said. That figure may be revised downward as many developments are being canceled or scaled back, he said.

New development will likely be limited until the housing market stabilizes and employment figures and absorption of existing space turn positive, Manning said.

How long will that be?

“Locally, the next year is going to continue to be very difficult for our employment and retail market,” he said. “I don’t think we’ll see economic figures as bad as they were at the end of 2008 or the beginning of this year, but we’re still in for higher commercial vacancies before things stabilize.”

He expects retail vacancy to reach 12.1 percent this year, up 360 basis points from last year.

Still, retailers are showing long-term interest in Las Vegas. Manning said he’s spoken with several regional restaurant chains that expressed interest in expanding here, although their location was limited to the Summerlin or Green Valley communities.

Investors are also starting to look at the market again after taking a long hiatus as prices adjusted.

“We’re starting to see interest and offers on our recently listed properties,” Manning said.

Contact reporter Hubble Smith at or 702-383-0491.

UNLV Tech Park innovation building breaks ground
Construction on the first innovation building at the UNLV Tech Park is underway. (Bailey Schulz/Las Vegas Review-Journal)
Caesars Forum Meeting Center
Caesars broke ground Monday on its $375 million Caesars Forum Meeting Center (convention center) just east of the High Roller observation wheel. (Caesars Entertainment)
Technology reshapes the pawn shop industry
Devin Battersby attaches a black-colored device to the back of her iPhone and snaps several of the inside and outside of a Louis Vuitton wallet. The device, installed with artificial intelligence capabilities, analyzes the images using a patented microscopic technology. Within a few minutes, Battersby receives an answer on her app. The designer item is authentic.
Recreational marijuana has been legal in Nevada for one year
Exhale Nevada CEO Pete Findley talks about the one year anniversary of the legalization of recreational marijuana in Nevada. (K.M. Cannon/Las Vegas Review-Journal)
Young adults aren't saving for retirement
Financial advisors talk about saving trends among young adults. (Bailey Schulz/Las Vegas Review-Journal)
President Trump’s tariffs could raise costs for real estate developers, analysts say
President Donald Trump made his fortune in real estate, but by slapping tariffs on imports from close allies, developers in Las Vegas and other cities could get hit hard.
Las Vegas business and tariffs
Barry Yost, co-owner of Precision Tube Laser, LLC, places a metal pipe into the TruLaser Tube 5000 laser cutting machine on Wednesday, June 20, 2018, in Las Vegas. Bizuayehu Tesfaye/Las Vegas Review-Journal @bizutesfaye
Nevada Film Office Connects Businesses To Producers
The director of the Nevada Film Office discusses its revamped locations database and how it will affect local businesses. (Bailey Schulz/Las Vegas Review-Journal)
Opendoor isn't the typical house flipping company
Unlike most house flippers, the company aims to make money from transaction costs rather than from selling homes for more than their purchase price.
The Venetian gondoliers sing Italian songs
Gondolier Marciano sings a the classic Italian song "Volare" as he leads guests through the canals of The Venetian in Las Vegas. (K.M. Cannon/Las Vegas Review-Journal)
Building In Logandale
Texas homebuilder D.R. Horton bought 43 lots in rural Logandale. (Eli Segall/Las Vegas Review-Journal)
Indoor farming in Southern Nevada
Experts discuss Nevada's indoor farming industry. (Bailey Schulz/Las Vegas Review-Journal)
Former Fontainebleau could have become a Waldorf Astoria
Months after developer Steve Witkoff bought the Fontainebleau last summer, he unveiled plans to turn the mothballed hotel into a Marriott-managed resort called The Drew. But if Richard “Boz” Bosworth’s plans didn’t fall through, the north Las Vegas Strip tower could have become a Waldorf Astoria with several floors of timeshare units. (Eli Segall/Las Vegas Review-Journal)
LVCVA CEO Rossi Ralenkotter announces plans to retire
Rossi Ralenkotter, CEO of the LVCVA, on Tuesday confirmed a Las Vegas Review-Journal report that he is preparing to retire. Richard N. Velotta/ Las Vegas Review-Journal
Cousins Maine Lobster to open inside 2 Las Vegas Smith’s stores
Cousins Maine Lobster food truck company will open inside Las Vegas’ two newest Smith’s at Skye Canyon Park Drive and U.S. Highway 95, and at Warm Springs Road and Durango Drive. Cousins currently sells outside some Las Vegas Smith’s stores and at Fremont Street and Las Vegas Boulevard. (K.M. Cannon/Las Vegas Review-Journal)
Las Vegas home prices to continue to rise, expert says
Lawrence Yun, chief economist at the National Association of Realtors, gives homebuyers a pulse on the Las Vegas housing market. (Eli Segall/Las Vegas Review-Journal)
NV Energy announces clean energy investment
The company is planning to add six solar projects in Nevada, along with the state's first major battery energy storage capacity. Bailey Schulz/Las Vegas Review-Journal
3 Mario Batali restaurants on Las Vegas Strip to close
Days after new sexual misconduct allegations were made against celebrity chef Mario Batali, his company announced Friday that it will close its three Las Vegas restaurants July 27. Employees of Carnevino Italian Steakhouse, B&B Ristorante and Otto Enoteca e Pizzeria, all located in The Venetian and Palazzo resorts, were informed of the decision Friday morning. Bastianich is scheduled to visit the restaurants Friday to speak to employees about the next two months of operation as well as how the company plans to help them transition to new positions.
Nevada has its first cybersecurity apprenticeship program
The Learning Center education company in Las Vegas has launched the first apprenticeship program for cybersecurity in Nevada. It was approved by the State Apprenticeship Council on May 15. (K.M. Cannon/Las Vegas Review-Journal)
Las Vegas union members voting to authorize the right to strike
Thousands of Las Vegas union members voting Tuesday morning to authorize the right to strike. A “yes” vote would give the union negotiating committee the power to call a strike anytime after June 1 at the resorts that fail to reach an agreement. (Todd Prince/Las Vegas Review-Journal)
Small businesses struggle to find qualified candidates
A 2018 survey found that over two-thirds of small businesses in Nevada find it somewhat to very difficult to recruit qualified candidates. Bailey Schulz/Las Vegas Review-Journal
Nevada secretary of state website offers little protection against fraudulent business filings
Property developer Andy Pham tells how control of his business was easily seized by another person using the secretary of state website.
Caesars may be going solo in its marijuana policy
Several Southern Nevada casino companies aren’t following Caesars Entertainment’s lead on marijuana testing.
How much is the Lucky Dragon worth?
Less than a year-and-a-half after it opened, the Lucky Dragon was in bankruptcy.
Gyms and discount stores take over empty retail spaces
Grocery stores used to draw people to shopping centers. But many large retail spaces have been vacant since 2008. Discount stores like goodwill and gyms like EOS Fitness are filling those empty spaces, and helping to draw shoppers back in. K.M. Cannon/Las Vegas Review-Journal
Funding source of Las Vegas stadium for the Raiders is sound, expert says
The stadium is funded in part by $750 million of room taxes, the biggest such tax subsidy ever for a professional sports stadium. Robert Lang, executive director of Brookings Mountain West and The Lincy Institute at UNLV, says that is a good use of public funds. (Richard Velotta/Las Vegas Review-Journal)
Las Vegas needs light rail, expert says
Robert Lang, executive director of Brookings Mountain West and the Lincy Institute said he is afraid of a "congestion mobility crisis." Las Vegas needs a light rail system, he said, to accommodate the city's growing number of attractions. (Richard Velotta/Las Vegas Review-Journal)
Three takeaways from Wynn Resorts' Earnings Call
Matt Maddox came out swinging in his first earnings conference call as Wynn Resorts chief executive officer, boasting of record Las Vegas quarterly revenues and applicants lining up for work.
Star Wars VR Comes to Las Vegas
Sneak peak at the new "Star Wars: Secrets of the Empire" VR experience at the Grand Canal Shoppes.
Elaine Wynn continues her fight to change Wynn Resorts board
Elaine Wynn, the largest shareholder of Wynn Resorts Ltd., is seeking to kick a friend of her ex-husband Steve Wynn off the company’s board of directors. (Todd Prince/Las Vegas Review-Journal)
News Headlines
Add Event
Home Front Page Footer Listing
You May Like

You May Like