Primed for the next boom?

By Joe Schoenmann

Thursday, Dec. 16, 2010 | 2 a.m.

Of course, we’d all prefer that there had not been a recession.

But some developers think the tumult of the past three years and ensuing depreciation of property values valleywide has been a good thing for the redevelopment of downtown Las Vegas.

Time will tell if that belief in a silver lining is borne out.

But recent signs have been positive: the announcement two weeks ago that online shoe retailer Zappos.com is planning to move into City Hall in 2012, a move expected to bring at least 1,000 employees, and word Wednesday that a business called App-Order is moving from Southern California to 1100 E. Sahara Ave., bringing 23 jobs. The company’s website says it develops smart-phone applications for government agencies and private business.

These moves might reflect a return of the natural development order, which experts say could benefit downtown.

During the boom, an overheated real estate market fueled large-scale building, typically on the fringes of the valley where large, often less pricey, desert swaths were available. Not only did downtown not have acreage for such projects, but it was also hurt by its property owners’ expectations of huge returns on their holdings.

“The recession really has been good for downtown redevelopment because it has dropped those inflated land prices that we once held for those properties downtown,” said Robert Fielden, a Las Vegas urban planner and architect. “Before the recession, everyone thought their property was going to be the next location for a hotel-casino. Now we know that isn’t going to happen. Instant land wealth is a 20th-century phenomenon. It’s done here. It’s over for at least 20 to 25 years.”

Fielden laughs when reminded that the city used to have a map on its website showing dozens of mid- to high rises planned. Most of them were also condominiums. Few were built.

One developer, who did not want to be identified, said the recession interrupted the normal progression of development. It would typically begin at the city core with taller buildings that give way to shorter ones as you move farther out. Then, as the city grows, shorter buildings are gradually replaced with taller buildings.

“All that was passed over because you had people with land who only saw the brass ring, saw a get-rich quick formula and sold their land by getting zoning changes from elected officials,” the developer said.

Downtown also suffered as governing bodies, including that of Las Vegas, gave in to developers who proposed high rises away from the city center. The developer points to Allure, a 41-story high rise at the northwest corner of Sahara Avenue and Las Vegas Boulevard as one that’s out of place, surrounded by single or two-story buildings.

“Developers literally got whatever they wanted, rezonings for 50-story buildings, whatever,” the developer said. Officials “think they’re being business-friendly, but they’re really hurting the natural progression of redevelopment.”

Declining property values might restore that order. “Every time there’s a recession, there’s a resurgence of the inner core of a city,” he said.

Zappos CEO Tony Hsieh is talking about creating a corporate campus on additional acreage near City Hall.

Zappos.com, Fielden said, is the biggest source of energy to fuel a turnaround downtown.

“Those employees will have a demand for housing closer to the workplace, then for amenities closer to home,” he said.

Another Las Vegas developer who did not want to be identified agreed that downtown is about to experience a redevelopment boom. People who had purchased homes on the outskirts of the valley did so thinking they were investing in their future. So what if they struggled through the Spaghetti Bowl each day to get to their bailiff’s job at the County Courthouse? At least their faraway home was a future nest egg.

“These homes were rolling across the desert floor like carpet and people bought into it,” he said.

Now, about 80 percent of valley homeowners paid more for their residences than they’re currently worth.

“They had sacrificed time at home, time with their kids, they endured traffic because they thought they were going somewhere,” he said. “That’s not the case now. Now people are starting to ask: ‘Do I really need to drive all that way every day to the office?’ So they start looking at lifestyle, and since most of the valley jobs are in the central business districts like downtown, they start looking downtown to live.”

There’s one potential stumbling block to redevelopment, and not just in downtown Las Vegas. Almost every developer in Clark County tells the story of a major technology business or other desirable company that considered moving here for the low taxes, ability to get property for a song, government incentives — then backed down because Clark County has among the lowest percentages of college-educated residents in the country.

Fielden said: “We need to be supporting education so we can get people who have a mind who can handle more technical jobs. This is the time of the knowledge-worker.”

Bill Arent, director of the city’s business development office, agreed that education is “incredibly important.”

Unfortunately, turning that ship around takes time.

Meanwhile, city officials are selling downtown’s proximity to a major airport, Zappos’ commitment to the area and Las Vegas’ well-known hospitality industry, which will “always open up opportunities that we never thought existed,” Arent said.