Real estate experts see newer Las Vegas properties thriving in ‘15

A major local real estate trade group forecast a relatively robust commercial market in 2015, even as uncertainties loom.

Industry experts participating in NAIOP Southern Nevada’s 2015 Outlook event Thursday at The Orleans shared insights into likely market trends through year’s end. For the most part, panelists said the market should continue its recovery, although some sectors and submarkets will fare better than others.

In office and industrial markets, properties along the 215 Beltway will thrive, as older, functionally obsolete buildings along established corridors such as East Flamingo Road will struggle, brokers said.

Demand for newer buildings at the city’s outskirts has become so strong that tenants may have trouble finding space in 2015.

Randy Broadhead, an office broker with CBRE Las Vegas, said one client looking recently for about 130,000 square feet of call-center space found just two suitable properties, both with challenges.

“We’re starting to see that we might lose tenants to other markets with more ready-made call-center space,” he said.

The story is the same in industrial. Despite groundbreaking in 2014 on several large spaces of 200,000 to 464,000 square feet, the market will still see little to no development of distribution plants with more than 500,000 square feet, said Jennifer Levine, an industrial broker with Voit Real Estate Services. Big spaces that come online in 2015 should quickly find takers, Levine said.

Retail is also going strong, and weaker submarkets across the city should get a boost as high-end retail space runs short, Adam Malan of The Equity Group said.

Healthier markets could also mean a hotter market for land, said Colliers International’s Scott Gragson.

“Land prices may go up quite a bit as sellers get more confident,” Gragson said.

Those forecasts could change depending on a few key factors.

Oil prices have dropped below $50 a barrel, down from more than $100 in mid-2014. If prices stay low, tourism spending could get an assist. It would be more affordable for people to drive here, and they’d have more cash in their pockets once they arrived, said Marcus Conklin, vice president of business, public policy and marketing firm Strategies 360 and former associate director of UNLV’s Lied Institute for Real Estate Studies.

Also in question is whether the labor market will tighten, with more people seeking work than there are jobs available.

Nor is it clear how the Nevada Legislature, which begins its session Feb. 2, will find revenue to plug budget holes, said Conklin, a former Assembly majority leader.

Southern Nevada also may face headwinds in outsiders’ views of the market — an important factor in whether businesses and investors feel confident enough to buy local real estate or move here.

Las Vegas ranked No. 57 among U.S. cities for “average” development and redevelopment opportunities, according to a study by the Urban Land Institute, said economist John Restrepo of RCG Consulting. The market also lagged other Western metro areas in forecasted economic strength and investment prospects. And Las Vegas placed No. 64 out of 75 on a list of cities to watch for investment, development and homebuilding potential.

Even with those perceptions, the local commercial market has already improved, and Restrepo said he expects more progress in 2015.

He forecast 5 million to 6 million square feet of commercial completions, the majority in industrial. Vacancy rates, already at a six-year low, should “dive,” he added.

“I think we’ve finally come out of this big, ugly mess we’ve been in for the last five or six years,” Restrepo said.

Contact Jennifer Robison at jrobison@reviewjournal.com. Find her on Twitter: @J_Robison1.