CRUNCH GOES COMMERCIAL

Housing isn’t the only real estate market being crushed by the tidal wave on Wall Street.

The credit crisis is now having a greater effect on commercial real estate than the savings and loan crisis of the 1980s, a September report from the DLA Piper global law firm shows.

Andy Armenian, owner and broker of Vegas Valley Commercial, sees this unfolding daily in Las Vegas. His firm represents the seller of a 29,900-square-foot industrial building at 4080 N. Pecos Road that’s been reduced to $3.5 million, or about $117 a square foot.

Two years ago, investors would have grabbed that property for $145 to $150 a square foot with a down payment of 5 percent to 10 percent, Armenian said; now they’ve got to come up with 20 percent to 25 percent down to get a loan.

It’s a sign of the times as commercial markets search for stabilization, local observers said.

“You’re going to see sales prices dropping and properties pulled off the market because they can’t get their price,” Jeff Barton of Grubb & Ellis said. “Also, who’s going to lend right now? We’ve got to get a true valuation on the sales side and we’ve got to see what happens with the banks, if they get comfortable with lending again.”

The industrial market in Las Vegas, once driven by demand for big-box distribution and warehouse space, has changed drastically in the last two years.

Industrial vacancy reached 9.2 percent during the third quarter, up from 8.6 percent in the previous quarter and 5.9 percent a year ago, Grubb & Ellis reported. Average annual asking rent ranged from $6.71 a square foot for warehouse and distribution space to $12.45 a square foot for research and development space.

Landlords no longer have the upper hand in setting rental rates, Barton said. They’re offering rent concessions and increasing tenant improvement allowances to upward of $50 a square foot.

For the first time in eight years, industrial construction fell below 1 million square feet in Las Vegas.

Most developers are waiting for evidenced demand for space, stabilization of rental rates and a reduction in land prices before venturing back into the market, Barton said.

Lack of available financing remains the chief concern of respondents to DLA’s September survey on the state of the market.

“Frustrated with the ongoing credit crisis that continues to reshape the financial markets, real estate executives are expressing a new record level of bearish sentiment as they continue to be reminded of the cyclical nature of the industry after nearly a decade of prosperity,” the report said.

Before the collapse of Lehman Bros. Holdings Inc., American International Group Inc. and Merrill Lynch & Co., the majority of survey respondents said that the savings and loan crisis was the event that had the greatest impact on the real estate industry in the past 20 years.

That sentiment changed after Lehman Bros. filed for bankruptcy. Eighty percent of respondents do not believe that these events signal the bottom of the cycle, nor do they see it as the “first sign of light at the end of the credit crisis tunnel.”

Las Vegas’ industrial market has not been immune to the economic downturn, Donna Alderson of CB Richard Ellis said.

Net absorption, or the total amount of space leased, fell to 18,400 square feet during the quarter. The airport, Henderson and northwest submarkets show negative year-to-date absorption.

Average monthly lease rates dropped to 73 cents a square foot, down 3 cents from the previous quarter and down 6 cents from a year ago, CB Richard Ellis reported.

Major companies continue to move into Southern Nevada with its attractive tax structure, Alderson said. Amazon.com took 142,000 square feet for a plant in North Las Vegas that will create more than 300 jobs and RC Willey Home Furnishings leased another 45,000 square feet.

The local commercial real estate market’s condition is not all doom and gloom. Forbes.com ranked Las Vegas among the top 10 U.S. cities for commercial investment.

“In the commercial real estate market, we are seeing moderate demand for rental apartment complexes while office buildings continue hurting for the next year,” Armenian said. “In the industrial sector, new construction has considerably slowed and generally we expect the market to stabilize during third and fourth quarter of 2009.”

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

ad-high_impact_4
Business
Bellagio, MGM Resorts International’s luxury hotel turns 20
The more than 3,000-room Bellagio hotel is situated on the site of the former Dunes Hotel. The Dunes was imploded in 1993, and construction of the Bellagio started in 1996. It cost $1.6 billion to build, making it the most expensive hotel in the world at the time. The Bellagio was former Wynn Resorts Ltd. Chairman and CEO Steve Wynn’s second major casino on the Strip after The Mirage. MGM Resorts International acquired the property from Steve Wynn in 2000. (Tara Mack/Las Vegas Review-Journal)
Facial recognition software at G2E – Todd Prince
Shing Tao, CEO of Las Vegas-based Remark Holdings, talks about his facial recognition product. (Todd Prince/Las Vegas Review-Journal)
Former NBA player, Shaquille O'Neal, speaks about his new Las Vegas chicken restaurant
Former NBA player, Shaquille O'Neal, speaks about his new Las Vegas chicken restaurant. Bizuayehu Tesfaye/Las Vegas Review-Journal @bizutesfaye
Bobby Baldwin to leave MGM
MGM Resorts International executive and professional poker player Bobby Baldwin is set to leave MGM.
Caesars has new armed emergency response teams
Caesars Entertainment Corp. has created armed emergency response teams. They are composed of former military and law enforcement officials. "These teams provide valuable additional security capabilities,” Caesars spokeswoman Jennifer Forkish said. Caesars is hiring Security Saturation Team supervisors, managers and officers, according to LinkedIn. The company did not say how many people it plans to hire for the units. (Las Vegas Review-Journal)
Las Vegas, airlines prepare for CES
CES in January is expected to attract more than 180,000 attendees. (Las Vegas Review-Journal)
AGS partners with Vegas Golden Knights
AGS is the nation’s second-largest manufacturer of Class II slot machines used primarily in tribal jurisdictions. It announced a marketing partnership with the Vegas Golden Knights NHL team. (Las Vegas Review-Journal)
Lehman Brothers bet big on Las Vegas
Lehman Brothers collapsed 10 years ago, helping send the country into the Great Recession.
Fremont9 opens downtown
Fremont9 apartment complex has opened in downtown Las Vegas. (Marcus Villagran/Las Vegas Review-Journal) @marcusvillagran
Ross & Snow launches in Las Vegas
Luxury shoe brand Ross & Snow has opened in Las Vegas, featuring "functional luxury" with premium shearling footwear. (Bailey Schulz/Las Vegas Review-Journal)
Remote Identification and Drones
DJI vice president of policy and public affairs discusses using remote identification on drones. (Bailey Schulz/Las Vegas Review-Journal)
Drones and public safety in Nevada
Two representatives in the drone industry discuss UAV's impact on public safety. (Bailey Schulz/Las Vegas Review-Journal)
Frontier Airlines to launch flights from Las Vegas to Mexico
Frontier, a Denver-based ultra-low-cost carrier, will become the first airline in more than a decade to offer international service to Canada and Mexico from Las Vegas when flights to Cancun and Los Cabos begin Dec. 15. (Rick Velotta/Las Vegas Review-Journal)
MGM Resorts International CEO Jim Murren addresses Oct. 1 lawsuits
MGM Resorts International Chairman and CEO Jim Murren addresses criticism his company has received for filing a lawsuit against the survivors of the Oct. 1 shooting. (K.M. Cannon/Las Vegas Review-Journal)
MGM Resorts International opens the doors on MGM Springfield
Massachusetts’ first hotel-casino opens in downtown Springfield. The $960 million MGM Springfield has 252 rooms and 125,000-square-feet of casino. (K.M. Cannon/Las Vegas Review-Journal)
MGM Resorts International prepares to open MGM Springfield
Las Vegas-based MGM Resorts International gave news media and invited guests a preview of the $960 million MGM Springfield casino in Massachusetts. The commonwealth's first resort casino will open Friday, Aug. 24. (K.M. Cannon/Las Vegas Review-Journal)
A Walk Through Circus Circus
It only takes a short walk through Circus Circus to realize it attracts a demographic like no other casino on the Strip: families with young children. (Todd Prince/Las Vegas Review-Journal)
Morphy Auctions, a vintage slot machines seller, wants gaming license
Vice president Don Grimmer talks about Morphy Auctions at the company's warehouse located at 4520 Arville Street in Las Vegas on Thursday, Aug. 16, 2018. (Rick Velotta/Las Vegas Review-Journal)
Nevada's venture capital money doesn't stay in state
Zach Miles, associate vice president for economic development for UNLV, said there’s venture money in Southern Nevada, “but trying to find the right groups to tap into for that money is different.” According to a 2017 report from the Kauffman Foundation, Las Vegas ranked number 34 out of 40 metropolitan areas for growth entrepreneurship, a metric of how much startups grow. With a lack of growing startups in Las Vegas, investment money is being sent outside of state borders. The southwest region of the U.S. received $386 million in funding in the second quarter, with about $25.2 million in Nevada. The San Francisco area alone received about $5.6 billion. (source: CB Insights)
Neon wraps can light up the night for advertising
Vinyl wrap company 5150 Wraps talks about neon wraps, a new technology that the company believes can boost advertising at night. (Marcus Villagran/Las Vegas Review-Journal) @brokejournalist
Nevada on the forefront of drone safety
Dr. Chris Walach, senior director of Nevada Institute for Autonomous Systems, talks to a reporter at NIAS's new Nevada Drone Center for Excellence of Public Safety, located inside the Switch Innevation Center in Las Vegas. K.M. Cannon Las Vegas Review-Journal @KMCannonPhoto
Motel 8 on south Strip will become site of hotel-casino
Israeli hoteliers Asher Gabay and Benny Zerah bought Motel 8 on the south Strip for $7.4 million, records show. They plan to bulldoze the property and build a hotel-casino. Motel 8 was built in the 1960s and used to be one of several roadside inns on what's now the south Strip. But it looks out of place today, dwarfed by the towering Mandalay Bay right across the street.
TOP NEWS
News Headlines
Add Event
Home Front Page Footer Listing
Circular
You May Like

You May Like