Declining land values in the Las Vegas Valley reflect high vacancy rates in the commercial real estate sectors and a struggling housing market, Applied Analysis principal Brian Gordon said.
The Las Vegas-based business advisory firm reported an average price of $524,725 an acre for 427 acres sold in the third quarter, down 73.9 percent from the same quarter a year ago.
Excluding a 4.9-acre parcel of resort property between McCarran International Airport and Bali Hai Golf Club that sold for $30 million, or $6.1 million an acre, the average price was $459,798 an acre.
Pricing of nonresort property fell for the third straight quarter following a peak of $939,400 an acre in fourth quarter of 2007.
"It’s a function of what’s happening in the local economy and the effects of this global financial crisis," Gordon said. "There’s a significant amount of investor concern in the market. I think there’s certainly potential for further devaluation in the coming quarters."
Fundamentals within the residential, commercial and resort markets have softened, so there’s less end-user demand for raw land, he said.
Demand for newly constructed developments has slowed while speculative land investments have come to a near standstill. Also, lender repossessions have brought pricing levels down further.
The recent downshifting from unsustainable conditions reported from 2004 to 2007 is now being reflected in demand indicators, Gordon said.
"The new realities of the market have price points resetting and those that purchased property during the past two years are trying to make financial sense of their investments," he said.
Higher density development and limited land availability drove some of the previous price increases, he said.
The land market is divided between those with the ability to weather the storm and those with no choice but to sell, Applied Analysis founder Jeremy Aguero said. Investors with available capital are looking for deep discounts.
"Some aggressive investors are even seeking to obtain vacant property for the mere value of infrastructure improvements, which is irrational even in the current economic environment," Aguero said. "We have long held the position that a correction in land prices was necessary. It is now well under way."
Contact reporter Hubble Smith at hsmith@ reviewjournal.com or 702-383-0491.