Las Vegas Sun

March 28, 2024

2003 recovery seen for commercial real estate

Strong in-migration growth and a growing interest by institutional investors to increase their commercial real estate holdings in smaller markets like Las Vegas should boost the Southern Nevada market, an expert said Thursday.

Alan Schlottmann, a UNLV professor of economics and director of research for UNLV's Lied Institute for Real Estate Studies, and several real estate executives spoke at a conference attended by officials from more than 150 developers, title companies, banks, appraisers and mortgage companies.

Schlottmann also said he sees recovery in the nation's commercial real estate market being delayed to late next year from his earlier projections of a recovery by mid-2003.

"Traditionally, the nation's commercial real estate market takes about six months to catch up with the recovery in the economy," he said. "However, this recovery will take longer than the rule of six months this time because consumer spending is already extraordinarily high and the fall-off in business investment is more severe than expected."

Schlottmann said Las Vegas' economy is in a better shape than that of the nation's despite a slower-than-expected expansion of retail and service businesses and slow growth in new business start-ups following the downturn in the national technology industry.

"This is because of Las Vegas' strong population growth and retirement migration and a willingness by consumers to spend money in this market," he said. "Las Vegas is also lucky in that it has not had the destruction of markets like telecommunications, high technology and dot.coms in the state."

"There are some indications that institutional buyers that used to buy properties in larger markets like Los Angeles are looking at Las Vegas like they didn't use to," Schlottmann said. "Because of the recent stock market losses, they may consider buying real estate instead of stock."

Thomas Stilley, senior vice president of real estate brokerage Colliers International's office division, said he sees the market recovering as early as the middle of next year.

That's because of indications that big operators of call centers and financial services operations, which had held off expansion or relocation in Las Vegas this year because of the recession, may reactivate these plans in 2003.

"We need additional new major companies like Ford Motor Credit and technology companies, which we hope the Cheyenne Technology Corridor (in North Las Vegas) will bring to the Valley. We need regional firms looking for regional offices to come back into our market," Stilley said.

John Restrepo, principal of Restrepo Consulting Group LLC, a Las Vegas real estate consulting firm and appraiser, said the Las Vegas office market is the weakest compared with the retail and industrial sectors.

He said the office market may take a year to recover because of the slow economy, an increase in Las Vegas business bankruptcies and a glut of existing space in parts of the Valley.

"In second-quarter 2002, the geographical submarket with the greatest direct office vacancy was the airport area and Henderson because a lot of office space became available for occupancy ahead of demand," he said.

Office vacancy rates in Las Vegas for the second quarter were 12.5 percent versus 9.5 percent in the same period last year, Restrepo said. Retail vacancy rates for the second quarter were 3.2 percent versus 1.9 percent for second quarter 2001, while industrial vacancy rates for the second quarter 2002 were at 8.9 percent compared with 6.3 percent for the same period last year.

"The retail market is still healthy because of our strong population growth and because we were undersupplied for retail for many years," he said.

Thursday's conference was sponsored by Colliers and Restrepo, in association with In Business Las Vegas, a weekly newspaper that is a sister publication to the Las Vegas Sun.

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