TopShop, other retailers enter Las Vegas market despite sour economy

The Las Vegas economy hasn't yet recovered from the beating it took during the nation's recession.

Sure, visitor volumes have been climbing back to their pre-recession levels for more than a year, but tourism numbers were still down 1.2 percent through May when compared with the first five months of 2007, according to numbers from the Las Vegas Convention and Visitors Authority. Tourist spending remains below peak levels as well.

And then there's all that bad press, with national magazines from Time to Newsweek to Forbes writing about Las Vegas' especially sour economy. Even The New York Times wrote as recently as October that Las Vegas was "staggering under a confluence of factors" that left the city out of any national recovery.

But don't tell that to TopShop.

The British clothing retailer announced Thursday that it plans to open a flagship store in Las Vegas at Fashion Show mall on the Strip. The 20,000-square-foot store will house TopShop for women and TopMan for, well, men. It's scheduled to open in March with 170 employees.

TopShop isn't the only retailer taking a big chance on Las Vegas despite the city's uninspiring economic recovery. Watch retailer TAG Heuer and women's clothing designer Stella McCartney opened flagship stores at CityCenter's Crystals in the winter. Other companies rolling out flagship stores in Las Vegas during the downturn include leather and accessories retailer Hermes, jeweler Tiffany & Co. and clothing retailers Forever 21 and H&M.

So why is a slumping Las Vegas still a top destination for some of the world's best-known retailers?

TopShop didn't return a call by press time seeking comment, but local experts say the tourism base's size, retail's long-term prospects here and falling lease rates make the Strip as attractive a retail market as ever.

"Despite the fact that the Las Vegas tourism industry faced significant challenges over the last three years, the market still welcomed nearly 40 million visitors in each of those years," said Brian Gordon, a principal in local research firm Applied Analysis. "That exposure is significant."

That exposure is also international, said Laurie Paquette, vice president of asset management for Fashion Show's owner, General Growth Properties. Tourists from around the world come to Las Vegas, giving retailers here a "good cross-section that allows them to introduce their brand to a tremendous number of people," Paquette said.

Plus, even if Strip retail sales aren't what they were, a store with midlevel price points, such as TopShop, can still do enough business to turn a profit, Paquette said.

What's more, store owners think beyond today's sales potential, said John Knott, executive vice president of commercial real estate brokerage CB Richard Ellis in Las Vegas.

"Retailers don't plan on a one-year cycle. They plan for the long term," Knott said. "Most of them had expansion plans on hold for a couple of years, given the economy. As we come out of the recession, for companies not here yet, this market is a good place to be."

Gordon and Knott agreed that falling lease rates have probably helped draw new business, as well. Some mall owners cut rents as sales slowed and property values declined, and those discounts have improved the math for retailers, though Paquette said Fashion Show hasn't reduced its lease rates during the recession.

Expect the parade of flagships and new concepts to continue, Knott said. Outside of New York, Chicago and Beverly Hills' Rodeo Drive, there's not a better flagship market in America, based on sheer numbers of potential shoppers and opportunities to build an unusual store, as the World of Coca-Cola did with its giant Coke bottle at Showcase.

Knott doesn't forecast much new retail space on the Strip in the near future, but he said turnover in existing centers will make additional flagships possible.

That's the case at Fashion Show. Clothing retailer J. Crew left the mall in April, and two adjoining stores, Levi's and Gap, relocated to other spaces in the mall. Those three spaces will house TopShop and TopMan.

There will be many more opportunities to bring first-time and flagship retailers to Fashion Show in 2012, Paquette noted. A number of 10-year leases will expire in the mall's 2002 expansion area, making way for a fresh lineup. Leasing officials are focusing on deals with retailers who aren't yet in the market, Paquette said.

"There's absolutely always room for new stores. We continue to update our tenant mix," Paquette said. "Even though we (the Strip) get 37 million visitors a year, some of them are repeat visitors. We want to add new concepts for them."

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.