Hal Rothman on how the old-fashioned approach to growth has reclaimed Las Vegas from a concept that was doomed from the start

Sunday, July 23, 2006 | 7:43 a.m.

The Manhattanization of Las Vegas is over. This gassy phrase captivated the regional imagination, but it turns out to be more smoke than substance.

We are not going to see a skyline that resembles the urban spaces of New York. Nor are we going to become a city of pedestrians who use public transportation to get where we are going. The idea was overblown to begin with; the phrasing was typical Las Vegas, designed to appeal to people whose eyes are bigger than their stomachs.

When the condo boom began almost two years ago, it was clear to anyone with any sense that most of the projects were conceived on a wing and a prayer, but I do not think anyone expected such a complete fiasco. A number of factors intervened.

The single biggest problem was that too many people without experience in this complicated market discovered it at the same time. Simply put, there were too many projects that were too similar, both in amenities and price. The proposed towers all looked the same, and their pitchmen sounded the same. Who could tell them apart? And why would they bother?

Even more, the price on most of the units was above $400,000, well outside the range of most Las Vegas families. This meant that the entire market was designed to appeal to the investor class, people for whom having a condo in Las Vegas was a desirable write-off of one kind or another. Such people are savvy; they have money and know how to use it to their advantage. Typically skilled at investing, they knew junk when they saw it.

Another intangible became the growing shortage of materials. It has become fashionable to blame this on Hurricane Katrina, but in reality, it is a symptom of a larger global problem over the competition for resources.

The expansion of China's economy has put tremendous pressure on raw materials. With a 10 percent growth rate, China sucks up almost every loose piece of steel or yard of cement. That meant Las Vegas builders were paying higher prices for materials even before the local demand soared. That drove up already exorbitant costs and prices followed.

Nor was there enough skilled labor in the Las Vegas Valley for all these projects. We have always had a shortage of labor here, but never before has it been so severe. Las Vegas contractors have been having a field day. One fellow I know tells of a general contractor who gave him a price one month and then asked for double the next. When the man balked, the contractor said that he was welcome to find someone else. Of course, there was no one else available.

This extends all the way through the skilled trades, the plumbers and electricians. There has always been a premium on skill in greater Las Vegas, but it has never been as acute as it is now. Everyone with trade skills is booked halfway into the 2010s.

What this means is what it has always meant - a rush to dependable brands and projects where the quality is guaranteed and the work will get done. In the newest Las Vegas, the post-Mirage Phase market in which we live, this means MGM Mirage. The company that staked its future with the Las Vegas Valley has become the largest real estate developer in Nevada history. Its bricks-and-mortar operations inspire confidence in buyers. They are lining up in numbers for the CityCenter project, which is not taking reservations yet.

So we find that people with money do not always throw it around. They run to places where their investments are safe. They are more sophisticated buyers than we have previously seen in the Las Vegas Valley and they have loudly voted. The condo craze has become a bust.

There is an important lesson in this for people who think that they can just show up in Las Vegas with money and take over the town. The scale of the poker game that is Las Vegas development is so great that no amount of outside money buys more than a seat at the table. And a seat alone is no promise of success. Investing on the Strip and its surroundings has taken a new direction.