Construction nears standstill
Commercial sector enters ‘drought’ with demand staying low
Sam Morris
Construction continues this week at Tivoli Village at Queensridge at Rampart Boulevard and Alta Drive. Work resumed recently on the mixed-use development after construction was nearly halted a year ago. Commercial construction has slowed dramatically in Las Vegas.
Saturday, Nov. 7, 2009 | 2 a.m.
Sun Archives
- Commercial building headed for standstill (11-6-2009)
- Experts say economy crushing Las Vegas real estate market (10-30-2009)
- Q&A: Frank Gatski (10-20-2009)
- Commercial developers hope there’s nowhere to go but up (10-9-2009)
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The state bird of Nevada, the construction crane, is on the endangered species list.
The good news, at least, is that it still has a few places to roost — maybe an amazing achievement in itself, given the economic climate.
Las Vegas research firm Applied Analysis reports there are nine commercial projects of consequence under construction off from the Strip in Southern Nevada. Once most of those projects wind down early next year, there’s not much in the pipeline and development will essentially cease, said Jake Joyce, an analyst with Applied Analysis.
“With limited projects remaining under construction, the build-it-and-they-will-come mentality has gone the way of pillbox hats, Benny Goodman and your grandmother’s dance card,” Joyce said. “Essentially, commercial is following the same path as tourism. It is about supply and demand.”
After the completion of CityCenter, the most prominent project under construction will be Tivoli Village at Queensridge, which recently resumed work on its mixed-use development after virtually halting it a year ago. Also, Marnell Properties on Monday will break ground on a 200,928-square-foot airfreight logistics center on McCarran International Airport’s new Terminal 3.
With the completion of most of CityCenter in December, the long-range outlook, analysts say, is that there won’t be another major casino project built on the Strip for another decade.
With commercial vacancy rates at record levels, weak demand because of the economy and job market, and with credit hard to obtain, the chance for new projects is low. Las Vegas now has the same amount of space occupied as it did in 2006, and there’s been millions of square feet added since then.
“It will be pretty bad,” said John Restrepo, principal of Restrepo Consulting. “We are going to have a drought of commercial construction for a number of years until we burn through this inventory.”
Commercial has nearly caught up with the home construction industry, in which builders are taking only about 400 permits a month because of weak demand given the foreclosure inventory. Fewer than 5,000 homes will be built in 2009, compared with more than 35,000 a year during the boom.
The office market has 11.2 million square feet of empty space with a vacancy rate of nearly 23 percent. That equates to about five years of inventory, Joyce said.
With the unemployment rate in Las Vegas at 13.9 percent and rising, there won’t be job creation to spur demand for office and industrial space, Joyce said.
The industrial real estate market is hurting too, with 13 million square feet of vacant industrial space, which is about two years of inventory.
The retail sector has 5.1 million square feet of vacant space, a supply of about two years, Joyce said.
With foreclosures expected to increase in 2010, the value of vacant commercial space will slide and make it more difficult for developers to build anything that can be competitive, analysts said.
Besides Tivoli Village, another project kicking off is a $29 million freight and mail sorting operation for FedEx, UPS and airlines scheduled to be completed in about a year.
Analysts said projects such as the Marnell Air Cargo Center will proceed because they’re built specifically for companies rather than speculative development. The project is nearly fully pre-leased.
Other projects Applied Analysis reports are under construction off the Strip are:
• A 412,000-square-foot warehouse facility at the southwest corner of Sunset Road and Torrey Pines Drive.
• A 50,000-square-foot distribution center on Trade Drive in North Las Vegas.
• The 48,047-square-foot Tuscano Medical Park Building C on Jeffreys Street.
• The 130,000-square-foot Corporate Center at the Curve on West Teco Avenue.
• The Campos Office Building — 84,184 square feet of government office on Bonanza Road.
• Caroline’s Court — 258,210 square feet of retail at U.S. 95 and Durango Drive.
• Phase 2 of retail development totaling 101,550 square feet at Horizon Ridge and Green Valley parkways.
The list is telling because in early 2007 — when commercial construction was booming — there were 75 to 100 projects under construction, Joyce said.
At least three dozen office projects that Applied Analysis had previously listed as planned are on hold because they are no longer being marketed, Joyce said. That doesn’t include other projects under construction that have stalled because construction loans expired and banks won’t extend them.
“The banks are trying to shore up their balances and it doesn’t make sense to loan more money on a project that is going to sit vacant and they are eventually going to take back,” Joyce said.
Added Restrepo: “We won’t see much if any new spec commercial development until we see vacancies below 10 percent for an extended period of time.”
That’s quite a comedown for a region that had twice the construction employment as the national average. No one ever expected a slowdown of this magnitude, Restrepo said.
“Southern Nevada went through a long stretch having a disproportionate share of its job base in construction, at least by national standards. Many in the community started to believe that this reflected a normal and sustainable job base. The recession has dramatically shown how transitory construction employment really is,” Restrepo said.
In its latest quarterly report, the Associated General Contractors of Las Vegas said 19 commercial building permits were issued in September with a value of $10 million. Between September 2007 and September 2008 the value of commercial permits averaged $130 million per month.
Steve Holloway, the industry group’s executive director, said it may be another two to five years before commercial construction picks up in the private sector and that hope for the near term is expanded government spending.
The slowdown in construction has also prompted an exodus of construction workers because about 15,000 of the 50,000 union-hall workers are considered “travelers,” in that they relocate to markets temporarily for work and return home when work is no longer available, Holloway said.
“Once CityCenter is done, that is going to be it for a while,” Holloway said. “It is going to be ugly. There is so much supply that it will remain idle for a while. Unless some huge project magically takes off, I think Southern Nevada is going to remain in this recession two to five more years.”
Holloway said tourism won’t be enough to push Las Vegas out of its recession because construction is the second-largest industry in an economy predicated on growth. That industry pays more than 30 percent of sales and use taxes, he said.
“Unless construction recovers both nationally and locally, we are not coming out of this recession no matter what gaming does,” Holloway said.
A version of this story appears in In Business Las Vegas, a sister publication.
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with more projects being cancelled because of the recession,it doesnt look pretty. state and local governments nationwide are feeling the effects of lost tax revenue. the good ones were keeping a surplus to backstop hard times and freezing new hiring. why these same people have to hire "experts"to tell them of the bad economy is beyond me.
we (our company) are currently looking for retail units in las vegas, however the real estate agents are useless they simply don't return phone calls or send lists of vacant properties, whilst landlords are still trying it on with high prices..
get some sense people
we want 35 shops yet cant expand because of stupidity, we employ 7 people per shop, yet cannot get the properties!!
these landlords/ladies deserve to go bust..
"With limited projects remaining under construction, the build-it-and-they-will-come mentality has gone the way of pillbox hats, Benny Goodman and your grandmother's dance card,"
Hey now, no need to bring grandmas into this!
I noticed that massive growth of the city everytime I came to Vegas. And I used to come 2x/year for not less than 3 weeks every time, leaving about 3000-5000 usd in the city, including hotel, rental car, dining, gaming action, shopping, etc. I used to gamble mostly daily, but never took high risks. Quarter full pay videopoker on the full pay machines can be quite entertaining for hours without losing your house, and sitting in a 4-8 limit hold'em game at Sunset Station with the retired people can't be that expensive, either. But it's always fun. Those are things I will keep doing when I come back to Vegas next time.
I am aware of the fact that buying a home or a condo must be very very affordable these days. I also have an idea to get the casino business getting some jump-start, but it's tough to get to the right people listening to me. I would require somebody who has something to decide and is willing to listening to my ideas. There is a way to get business go up to a degree because of certain economical conditions. Please, Las Vegas, if there's anybody around interested to what I have to say....go ahead and contact me under borisradtke at hispeed dot ch. I know this was a bit out of context, but I also agree that further construction in Vegas will probably be limited to remodelling but not adding new properties , casinos, commercial centers. The capacities are big enough now, so now it's probably time to increase quality and work on the future infrastructure. Slash-and-burn mentality is off, it's time to conserve resources and make Vegas what it used to be: A jewel in the desert. It's possible, and once again, if there's anybody reading this interested to my idea, I am open for a message.
Greetings from Switzerland
Construction is not the solution, IT IS THE PROBLEM!
To much growth, too fast, unsustainable and very poorly planned! It's vegas baby!
Thank you harry Reid. Your actions following Ms. Pelosi are working out so well for this state.
hey MARKP screw the realtor go st8 to the property manager they be glad to talk to u. realtor are bunch of thiefin bastard anyway
perry
the property managers are not much better, they are still in disneyworld with prices
If you compare Phoenix commercial real estate to Vegas, Phoenix has accepted reality and the asking prices for vertical and land inventory have dropped. The Vegas listings are still too high and will require more foreclosures or deals at realistic prices before sales volume will increase. The commercial sector will have to go through the same adjustment residential product has.
All these developers must have been too young to remember the 70's. Bad, bad times, 15% interest rates. Late 80's and early 90's, US was on its knees, especially Cali.
What were they thinking? Vantage Lofts in Henderson 1/2 done, abandoned. Same builders (Slade) partially built a church on Lake Mead as part of the deal. Incomplete. Behind Vantage are 4 office buildings. One actually being used, albeit with "For Lease" signs out front. 2 others look complete, and empty. The 4th has plywood windows. Across the street, the torn up disaster that is Black Mountain. Piles and piles of dirt, nothing else.
Yet this is one small area in the overall mess. Which begs the question-was there any master plan to regulate this out of control growth? Did the overpaid loafers at the City of Henderson simply stamp plans "Approved", and hire more and more plan checkers and inspectors? Boulder City controls its growth, why not Henderson?
As Jay Leno says "Too late, who knew?"
Las Vegas greed and drunken attitude has finally bit it self in the ass.
Shortsightedness of banks and politicians (except Mayor Goodman and Senator Reid) has led Vegas to the brink once again.
Both the Mayor and the Senator have been screaming out for diversity, while everyone else was on the build it bandwagon.
The Mayor has been pushing for a 64 acre Medical Research facility and campus and the Senator has done everything possible to bring environmental industry to Southern Nevada.
These two area could spur some growth and bring in solid dollars and a new future to the economic structure of Nevada.
If Pittsburgh can do it, I think Vegas could do it better.
It is time to take some serious dollars from the gaming advertising budget and go after these two business sectors.
Right now there are several major over-seas companies looking to build battery plants in the US for use in automobiles.
It is time to take a hard look at UNLV, upgrade it campus and expand it courses into Medical and Science. For a city with amazing architecture, the UNLV campus is dump compared to other Universities in the region.
It's Maryland frontage street is a disgrace and the rest of the campus is 4rth rate, there are JC colleges with way better facilities.
Wake up a diversify or die Las Vegas. Never again should it depend on construction for anything.
Also, take a hard look at Greenhouse food production, we got the sun lets put it to use.
We could be feeding the country with Greenhouse vegetables year round.
Wake up Vegas and stop trying to go with easy fast money and go for substance for the future.
Newsdawg
Most major economists are talking about ANOTHER stimulus... If it is targeted to small business would it be a good idea? I'm not an economist so what does everyone else think?
I'll tell you "who knew":
The hogs at the development trough knew, that's "who knew".
Many of us saw this coming YEARS ago, but the "financial-meth" people kept mainlinin' theses projects to get their sorry-ash development fix.
Why did they do it? Addiction.
How did they do it?
THEY BORROWED PAST THE GRAVE.
That's how they did it. All of them.
Now you, me and everybody else has to pay for this pathetic baloney, big time.
And the Politico "donation" specialists perverted the system with their political "financial-meth" cash for their elected pals to run cover for 'em.
Check all the "donators" campaign contributions to these pathetic elected flacks, free and online, that will tell the sorry "financial-meth" real estate and development tale.
(Get your checkbook ready to pay up, if you still have one, 'cuz YOU gonna pay for this one BIG TIME...)
lol...
there's markp again, spouting nonsense about real estate agents.
umm...they probably don't return YOUR call because if you hate us so much...why WOULD we return your call?
Well well.....I love the fact that this article points out how many travel card union workers were here in Nevada during the boom time. The fact they seem to have left out is many of these "travel card" construction workers are still here, taking jobs from our local boys, forcing them to take up roots and leave. What the hell is the matter with this union here? Why are travel cards allowed to take jobs from our local construction workers?
I can tell one reason.....
My fiance worked at City Center for over a year and a half. All of his bosses were "travel card" workers, from Chicago, Florida and Michigan. When the lay offs started at City Center, guess who went first? It certainly wasn't travel card workers, unless they were totally useless or incompetent and had to leave or face termination. How is it that workers from another state have been allowed to make decisions on who stays and who goes, when they are not even local union workers? How is it that a travel card worker gets put in a position of power like this?
To make it worse, these travel card workers have now transferred themselves to the airport project while more local workers sit on the bench at the union hall. Disgusting! Then union needs to step up and make these travel card workers go home and give these jobs to local workers! PERIOD!!!
unions and harry reid - say good bye
markp- I don't believe you.
If you're telling the truth(35 SHOPS!!???? and no one wants to do business?? Come on now...), what's the name of the company you work for?
By the way, no one will return my calls either and we're trying to open 36 shops.. LOL!!
stevem:
That's funny, 'bro. Didn't see you listed as a licensee on the Real Estate Division's website to see if you EVEN HAD A LICENSE.
IF ANYONE WANTS TO CHECK TO SEE IF THEIR SO-CALLED "REAL ESTATE AGENT" OR "GURU" ACTUALLY HAS A LICENSE, GO HERE:
http://red.prod.lookup.nv.gov/SearchCrit...
FABULOUSLY LEGAL AND WORKS LIKE A CHARM.
Rumor has it that there are currently 600 union electricians at the hall sporting a contagious case of Obamaonomics.
Welcome to operation ghetto.
: {
I remember when the Swiss franc was 25 cents, see now the EURO-peons call get sex from Americans for a pack of chewing gum.
Phoenix had a similar article in the AZ Republic, although there is more going on there than Vegas.
Things will pickup when they start building the internment camp for the Republicans.
Obama recently extended the First Time Home Buyer Tax Credit to help sell homes and to create jobs:
In contrast, Forced health insurance costs will disqualify millions of middle class homebuyers qualifying for mortgages. Home buyers that do not qualify for Gov. assistance to buy health insurance, will either have to offer lower prices for homes or Opt-Out buying health insurance to eliminate that debt, to qualify for mortgages. At stake, middle class home buyers support trillions in mortgages held by U.S. banks. Banks--already hold millions of defaulted mortgages. Disqualifying middle class home buyers may lower home selling prices erasing benefits of the First Time Home Buyer Tax Credit. Generally declining or stagnate home prices have caused job loss in construction and manufacturing. Current falling home prices continue to lower property taxes, forcing local governments to layoff workers and ask federal agencies for money; increasing federal deficits.
Just another cycle ... Been here, seen that.
Must be the change promised by the Obamination. Along with the bad mouthing he did about Vegas. Change you Obamination voters bought into lock stock and barrel.
"Where there is no vision, the people perish" Proverbs
The lack of vision that allowed unchecked growth now fails to act quickly to fill empty spaces with cut rate prices, tax incentives, and other incentives (6-12 months free rent) The result is predictable. The people will perish.
MOST OF THE LAS VEGAS JILLIONAIRE "PUNK-OWNERS" DON'T EVEN HANG OUT HERE IN THEIR "HOMETOWN" LAS VEGAS.
Read it for yourself, (just make sure you're sitting down when you do):
http://www.lagunajournal.com/sin_city_sh...
The article states "most of City Center will be completed in December". The 2 crooked towers are definately not that close to completion. I can't imagine someone wanting to lease (or buy) 35 shop spaces not getting calls returned. I'd get on a plane and drive around and call the numbers on the signs, or show up at their office. This would also give you a feel for the surrounding neighborhood to see if the location fits your needs. (A fine jewelry store or a gym would require different locations than a dollar store or a payday loan store). Even if you were just interested in one space, someone would want that commission!
theres always room for another fast food joint, i mean look at the people walking out on the street, they gotta keep that beer belly full; look at the guns on that matron, she needs sustenance.( is that a tattoo or a beauty mark, i cant tell.)
I know there are some union reps that read this article.
I think the local guys who are sitting at home while someone from Minnesota keeps working, need answers.
WHY ARE TRAVEL CARDS STILL WORKING IN VEGAS????? And please don't insult us with the ole' "they must work harder" or "its because they have a contract" etc. Lets cut to the chase, and discuss how this is allowed to happen in our local union halls. If no one is willing to speak up, they need to be voted out!!!!
With all the construction persons unemployed u would think that they accelerate some government projects. One that comes to mine is the new Veterans Hospital at 215. They have the money and land but it still will not get completed at the earliest till 2012. Before it can be opened they have to pass inspections and get approval for more money. This will take another year. Who says it doesn't pay to work for the government!!
"Once CityCenter is done, that is going to be it for a while."
"It is going to be ugly." "
"There is so much supply that it will remain idle for a while."
"Unless some huge project magically takes off, I think Southern Nevada is going to remain in this recession TWO to FIVE more years."
"Tourism won't be enough to push Las Vegas out of its recession because construction is the second-largest industry in an economy predicated on growth. That industry pays more than 30 percent of sales and use taxes."
"Unless construction recovers both nationally and locally, we are not coming out of this recession no matter what gaming does."
Mr. Holloway is correct........the truth is pretty self explanatory.
Wiz...
That Laguna Beach article is very interesting.
Holy Cow, these ultra-rich cats, even those in "bankruptcy"
sure live the life. I saw a couple names of people I thought were in prison. Money & justice are inextricably linked in Las Vegas, Nevada.
They do love to pamper themselves, don't they?
I think most people believe the bubble has burst......the 2nd wave is yet to follow.Projects like City Center couldn't have happened at a worst time. The massive overbuilding of track homes has to stop. "When" Las Vegas sees the bottom of this mess I only pray they have learned a hard lesson.If a recession of this magnitude happens again....roads to Las Vegas will be closed.The desert will reclaim the land formerly known as the strip.
rwal2222,
Since you're making the same comments on every thread, I too, will repeat my comments from the FountaineBleau thread...
It's OVAH. Get used to it. And stop scapegoating the travelers. Travelers sign "Book Two" and only go out when there's nobody on the books for "Book One." Jobs are winding down everywhere and locals and travelers alike are getting laid off. And screw that "us against them" mentality, anyway. Vegas was built on the backs of travelers. Locals alway discriminate against them, but the fact is, there is NO WAY any of these mega-projects could have been built, if they couldn't man-up with travelers. No way local labor could have done it alone. Yet local labor has always treated travelers as second-class citizens.
It's OVAH, rwal2222. So the scapegoating won't change a thing. Your days of $40 an hour jobs are finished for a decade and now it's time to move on. Heck, most of the last decade were gravy days that were illegitimate. Now we all know construction overdid it and bankrupted the entire nation. It's time to retrain yourselves and think about doing something different. Nobody is going to pay you $40 an hour to build anything, because we don't need anything built for a long time. The sooner you accept that, the better off you'll be.
Like we need a newspaper article to tell us that!
Good thing Reid is working hard for free health care, cap & tax. Harry likes to keep his pockets stuffed.
CityCenter is way too big and overwhelming for the Strip. It is a perfect example of "Bigger is not always Better."
hahaha!
lol!
how could you check to see if i had a license if you don't even know my full name?
again...all you anti-realtor people are morons.
Steve Wynn will turn thing around
Japan and Germany had national health care (Germany since 1870) and they have lower unemployment than the US.
Both Germany and Japan have companies and products that are respected around the world, Nation Health care didn't hold them back. Germany had freeways in 1933, ours were built in starting in 1959. So take an Aspirin (invented in Germany) Mr Dittohead and join the rest of the developed world.
mred
Japan has beed in a recession since the 90's and has stagnated since then, it has not recovered after numerous attempts by government - hint hint. Germany has not been a meaningful power for a while now, hint hint.
You keep hoping he changes us to be like them, I will keep resisting your attempts to get me to take care of you.
Ever since Wal-Mart quit prosecuting shoplifters that only stole less than 50 dollars worth of goods their prices have gone up. So what are people doing? Why they steal 49 dollars worth every day. The moral of the story is "People stink, and the smell is getting stronger."
tbvegas,
Hint hint for YOU: get your facts straight. Japan has NOT been in a recession since the '90's. Their growth and recession cycle has essentially mirrored ours -i.e., short recession after 9/11, longer recession after the U.S. turned down in '08. Also, they pulled out of their most recent recession before we did. Moreover, we could only wish we had a recessions like Japan's. Their unemployment rate is a whopping 5.3%! And that's about as high as they've ever seen it in the post-war era. No, national health care has not hurt the Japanese ONE BIT. In fact, smart people understand that it is a competitive advantage for the Japanese. Japanese manufacturers don't have to pay health care costs. In fact, UAW workers working for GM cost LESS per hour than workers in Japan cost Toyota. But then all the health benefit costs got tacked on to GM's cost structure, and that is what bankrupted GM. They couldn't compete with Toyota and the Japanese auto makers because the "legacy" costs and current health benefits cost have spiraled out of control. All of the industrialized world has national health care. They all also have lower infant mortality rates and longer life expectancies than the U.S. One nearby example, Canada, spends 10% of their GDP on health care costs. The U.S. spends 14%. Guess which country bests which, in every meaningful category of public health. (Hint hint)It's the one that has coverage for everybody; not the one that spends 14% for a broken system that only covers some.
As for "Germany has not been a meaningful power for a while now," what a load of crap. Germany is far and away the most powerful and influential nation in the EU. Those in the former West have a higher standard of living than Americans do. And those in the former Eastern half are on the rise, too. Germany, unlike the U.S., has maintained its manufacturing base. Germany is in a solid position to grow even stronger as Eastern Europe continues to integrate with the EU and the West.
TB Vegas, you know nothing. No hinting about that.
"The state bird of Nevada, the construction crane, is on the endangered species list."
Oh God. *facepalm*
america = fat, lazy, stupid.
japan = thin, ambitious, smart.
any liberal that looks at japan, or germany's national programs and then says "they can do it. it works there, it could work here" is in denial about how many people in america have no intention of pulling themselves up out of poverty.
if you don't need a good house or a nice car, poverty in america isn't that bad. the bleeding heart liberals take money from people that DO want to work and give it to you.
you're whipping a dead horse here. times are changing and not for the better. get use to the new lifestyle and start weaning yourself off the fast food, prescription drugs, and rancid budweiser that made america the fattest nation in the world.
Wow ! The construction industry is going to save Vegas? Really! This reminds me of the tower of Babel, story in the Bible if i remember they all built a a big building and half way through couldn't communicate with each other to finish the project, same story different era. Las Vegas better start remembering what you have to offer and who can afford it before you drive another nail. Gambling ,Sunshine, good weather, low Taxes, good air access. Promote Promote promote Adjust your prices NOW !those who don't adjust die those who adjust slowly will still die. Make a week in Vegas cheap fun great value , loosen up those slots ,advertise to the world about your affordable housing good weather low taxes, Build more empty buildings ...Geez . get off your asses and start promoting your city you have lots to offer. You sound like a bunch of french Canadians
Hey dipstick...
You can name call the Republicans, Conservatives, Independents and the Right.
But, watch what you say about Budweiser. You are approaching heresy my friend...
why has las vegas gone down? just read the ignorant comments above
blame Obama-even though with ECON 101 an D student knows it takes years and many factors to lead to a recession
blame the poor"they are taking my tax dollars" ignore the fact that the poor pay taxes too, they are not allowed the benefits of their taxes?
Irony-many of these same people with these same sentiments (blaming
illegals/poor) now come into my job and state "I never in my life have had to sign up for benefits, I don't know where to begin" as I try to hold in my smile thinking oh you must be the same people screaming about others causing a problem and now you're in their shoes hmm
Many unemployed and EMPLOYED people are coming in for the first time, having to tuck their tails between their legs . NO One on this site ever wants to say yeah Vegas is in this predicament because of me. I lived beyond my means trying to own a house, taking out a second mortgage, I voted for the council members that approved all these construction projects, I don't have a high school diploma oh well blame that phantom
worst is yet to come. blame everyone who voted for democrats and gave them control of all branches of government. corruption and greed will get out of control. you ain't seen noting yet but the majority of the people are to blame.
vegasfun01,
"corruption and greed will get out of control"...
Where on earth have you been since the turn of the century?
What difference does democrat or republican make?
Our elected officials' decisions are controlled by corporate interests anyway.
Wakeup-- You need to wake up and smell the coffee.Their are 230,000 illegals in Nevada that are stealing our jobs and having anchor babies so they can get welfare.It"s our politicians that put us in this predictament.They all need to grow a pair and support the 287(g)program.This is the same program Sheriff Joe Arpaio uses in Arizona.We are all in desperate need of jobs..Harry's not helping......