After a long crawl back from the recession, Las Vegas’ office market is seeing a spurt of speculative development, which has been rare for years.
Investors plan to build at least four high-end projects with around 900,000 square feet of combined office space along the 215 Beltway in the fast-growing southwest valley. The ventures come amid stronger-than-average demand for nice offices in the area and a shrunken vacancy rate across Southern Nevada.
“The timing is certainly right to see some new construction,” said CBRE Group broker Brad Peterson, an office specialist.
Las Vegas’ office vacancy rate remains higher than it was before the market crashed, and developers still aren’t building nearly as much office space as they did in the boom days. The valley also lacks a big roster of big office space users, given that the main employers here — casino operators — largely work in hotels, not in sprawling office parks.
The spreading new coronavirus is sparking tumult around the globe, though so far it’s unclear what effect, if any, it could have on commercial real estate development in the valley. Overall, Las Vegas’ job market has steadily improved for years, companies have taken more office space and developers are gambling again on this once-battered business.
Developers have packed the southwest valley with apartment complexes, housing tracts, corporate headquarters and other projects in recent years. But speculative office development — projects planned without users lined up first — has been rare in the valley since the economy started rebounding.
The biggest venture in the southwest is UnCommons, a roughly 40-acre, $400 million mixed-use project that would include 500,000 square feet of office space. Developers also recently broke ground on Axiom, a complex worth $55 million to $60 million with two 80,000-square-foot office buildings, and Narrative, a roughly $40 million project that calls for a 102,000-square-foot office building.
The Bend, a planned retail project across from Ikea, is slated to feature a five-story office building called MagnuM Tower.
Las Vegas’ economy, while still heavily dependent on tourism, has diversified with new employers in recent years, and the vacancy rate for class A, or high-end, office space in the southwest valley is lower than the market overall, said G2 Capital Development founder Frank Marretti, co-developer of the Narrative project.
“The confidence in the market has recovered probably to an all-time high,” he said.
The class A vacancy rate in the southwest valley was 9.3 percent in the fourth quarter of last year, compared with 19.2 percent for class A space valleywide, according to brokerage Colliers International.
Jim Stuart, a partner with UnCommons developer Matter Real Estate Group, said the southwest valley sits between where many executives and white-collar workers live, making it the “singular most convenient location.”
Colliers’ Las Vegas research manager, John Stater, pointed to population shifts, noting that the east side of the valley had “prime office space” at one point but now has high vacancy rates.
Developer Roland Sansone drew up plans in 2007 for an office complex at the Axiom site, Clark County records show. But the economy crashed soon after that, and he held off from building a project there until recently.
Axiom, whose steel-frame buildings will be wrapped in energy-efficient glass, would be the largest ground-up development ever built by Sansone’s namesake firm, said his son Neil Sansone, an owner of Sansone Companies.
Like other real estate sectors, office construction soared in Las Vegas during the mid-2000s bubble and evaporated during the Great Recession. Buildings also emptied as job losses mounted, saddling the valley with a bloated vacancy rate that has taken years to deflate.
Las Vegas’ office vacancy rate was 7.9 percent in 2005, 22 percent in 2011 and 12.4 percent last quarter, Colliers’ data show.
Speculative projects didn’t entirely disappear before the current crop. Summerlin developer Howard Hughes Corp. built an office building in the Downtown Summerlin open-air mall, which opened in 2014, and another nearby that debuted in 2018 across from Red Rock Resort.
Both were almost fully leased at the end of last year, according to a securities filing.
Hughes Corp. also is in the planning stages of a class A office building next to Las Vegas Ballpark, spokesman Tom Warden said this week.
The company’s philosophy, he added, is to “only build additional commercial properties when we see ample market demand to fill the project.”