New GES building creates big vacancies in LV Valley

Jennifer Shubinski

Friday, Dec. 20, 2002 | 10:58 a.m.

GES Exposition Services, which produces some of the largest trade shows in Las Vegas, has moved into two new buildings totaling 850,000 square feet -- leaving almost 600,000-square-feet of office and warehouse space vacant in the valley.

The new buildings are on 54 acres off Interstate 215 near Las Vegas Boulevard and are a partnership between Los Angeles-based Majestic Realty Corp. and Las Vegas-based Thomas & Mack Development Group. Commerce Construction designed and constructed the building.

GES provides exhibition and event services in every major market in North America.

GES, a subsidiary of Phoenix-based Viad Corp., has been in Las Vegas for about 30 years. For at least 20 of those years, employees have worked out of a complex of five buildings at 1624 S. Mojave Rd., and occupied other offices and warehouses around the valley. GES employs 300 full-time employees and at least 200 union laborers.

"As the company has grown, we have built on to that building, chopped it up a bit more," said Al Dyess, executive vice president and general manager for GES in Las Vegas. "It's quite a maze when you walk through there. Over time it became somewhat inefficient."

The company's new buildings, which house the company production operations and warehouses, consolidate the Mojave location and other locations scattered throughout town, Dyess said. The company's corporate offices will remain at 950 Grier Drive for the time being, he said.

Along with the new buildings, of which about 75,000 square feet is devoted to office space, state-of-the-art infrastructure from phones to computers were installed.

"We certainly believe it will increase our capabilities from a service perspective," he said. "We are close to the whole Strip in general. It's a more attractive location for us."

The vacancies created by the move will have a significant effect on the Las Vegas industrial properties market because about 45 percent more space is expected to hit the market next year as compared to 2002, local brokers said.

That means the vacancy rate for industrial properties will likely jump from a typical 9 percent to 11.5 percent.

In 2002, 4.2 million square feet of industrial properties were completed, but only 3.3 million square feet were absorbed, commercial real estate brokerage CB Richard Ellis reported. Another 1.7 million square feet is under construction and another 3.4 million square feet in industrial space are planned.

"While on the face it is really exciting that GES is occupying a whopping 800,000 square feet in a beautiful new facility, they are leaving a lot of older, less functional space behind that will compete with the new construction that is under way and planned and other vacant space," said Suzette La Grange, senior associate with CB Richard Ellis' industrial properties division. "Most developers don't forecast this large amount of second generation space to come on the market at once."

Jeremy Aguero, principal analyst at Applied Analysis, a market analysis firm, said the problem will be temporary.

"The vacancy rate that goes up will be transitional at best," Aguero said. "It hurts us from a perception standpoint if the vacancy rate goes up, but overall growth is good."

In 2002, between 550,000 and 700,000 square feet of office space was absorbed, Aguero said. During that same time 1.1 million square feet came online.

"That's why the vacancy rate increased to just over 14.2 percent in the third quarter 2002," he said.

Aguero said that number has since fallen to just under 14 percent.

"The question is, what kind of rebound will we see?" Aguero said. "The GES building represents a year's worth of absorption."

Jerry Serl, trustee of the local family trust that owns the Mojave property, said the complex has been placed on the market for sale or lease. The asking price for the almost four-decade-old buildings is about $10 million.

"The listing agents have had quite a few inquiries, but until you get your money you just don't know," he said.

Tim Snow, president of Thomas & Mack Development Group, said in any market companies grow and expand, often leaving office space behind.

"In our market it's a trickle up situation, they will probably find a tenant for that space," he said. "What it will be I don't know, but it will find its market."

The GES Exposition building is the first project in a master planned business community south of I-215, said Rod Martin, vice president of Majestic Realty Co.

Plans are to have Thomas & Mack Development Group build office and flex space while Majestic Realty builds speculative industrial space, Martin said.