Las Vegas Strip retail forecast is optimistic

Wednesday, April 14, 1999 | 10:39 a.m.

A 1 percent vacancy rate at retail outlets on the Las Vegas Strip is allowing landlords to be choosy about tenants.

Industry experts say the demand for space should keep rental rates steady in the months ahead as sales volumes continue to justify the return. Rates currently range from $50 to $300 a square foot per year.

Annual retail sales average between $500 and $1,200 per square foot on the Strip. Nationally, the average is about $250 per square foot.

George Connor, a senior vice president with Colliers International in Las Vegas, said overbuilding doesn't appear to be a problem, even as developers prepare to triple the amount of existing retail space on the Strip in the next two years.

The reason: Those same developers are working to redefine the Las Vegas experience and tourism numbers are expected to swell as more rooms are built.

About 4.2 million square feet of retail space is expected to be added to an existing inventory of 1.2 million square feet. The biggest additions are a 1.5 million-square-foot center at the Mandalay Bay hotel-casino and a 1 million-square-foot addition to the Fashion Show mall.

Those properties are continuing to vie for one of the top prizes in the bid for attractive retail outlets -- Seattle-based Nordstrom. Co-president Pete Nordstrom said in January that the company was close to making a decision about locating a store in Las Vegas.

In February, the company released its list of cities where the company would build this year and Las Vegas wasn't on it. A Nordstrom spokeswoman said on Tuesday there was no new information about the company's plans for Las Vegas.

That hasn't stopped experts from speculating about where the company that had $3.6 billion in sales last year plans to go.

Connor said Nordstrom probably is evaluating different offers from Strip sites. The company is in such demand, he said, that it could get special amenities from whichever company turns out to be its landlord.

Local officials were hopeful that Nordstrom would make an announcement at Preview '99, a January conference sponsored by the Nevada Development Authority and the Las Vegas Chamber of Commerce. Now, they're hopeful Nordstrom could make an announcement at a major convention, the International Council of Shopping Centers in mid-May in Las Vegas.

A spokeswoman for the Fashion Show mall had no insights on Nordstrom. Fashion Show will more than double its square footage next year with its expansion.

Staci Columbo, marketing director for the Fashion Show, confirmed that sales and visitation at the mall have been strong in the first quarter. She acknowledged that drawing more visitors to Las Vegas is important for the new retail space to stay busy -- but so is educating tourists about what is available.

"My view of retail is the same as a casino executive's," said Columbo, a former marketing professional at the Las Vegas Hilton. "We have to educate people about what's available and where they can go to shop."

When the Fashion Show expands, Columbo will have a new anchor to promote. New York-based Lord & Taylor, a division of the May Department Stores Co., which operates Robinsons-May in Las Vegas, will add a 126,000-square-foot upscale department store.

Lord & Taylor operates 73 stores in 33 markets and had sales of $2 billion in 1998.

Connor envisions that Las Vegas' retail scene will evolve into as big an attraction as gaming for many visitors. He said exotic themes and entertainment will be incorporated into the shopping centers

While cities like Reno and Atlantic City will look at Las Vegas as competition, Las Vegas will consider New York, Chicago and San Francisco as its main rival because they offer the same diverse entertainment, dining and shopping experiences. Those cities also offer world-class resorts that serve as a vacation alternative.

While the outlook on Strip retail is upbeat, Colliers officials painted a different picture for the industrial real estate sector.

Senior Vice President Michael De Lew said vacancy rates valleywide remained at about 10 percent as strong growth in supply matched strong growth in demand. But in some submarkets, the rates were much higher.

In the north, De Lew said, vacancy is at 16.6 percent, led by a high vacancy rate at the Las Vegas Motor Speedway. De Lew said the industrial park designed to accommodate racing teams and companies affiliated with automotive products hasn't taken off as developers had hoped despite the quality of the speedway track.

Experts say most companies are firmly entrenched in the Southeast and around Indianapolis and aren't likely to relocate to Nevada because of the roots they've established. That's problematic to the Speedway's park, since much of the infrastructure was designed for automotive companies.

Other potential industrial customers aren't interested in those types of amenities nor the location far from other city services and businesses.