Development in valley is on horizon — just not yet

By Buck Wargo

Fri, Mar 19, 2010 (3 a.m.)

The office vacancy rate may be approaching 25 percent and rental rates are dropping in Las Vegas, but Rick Myers said the construction industry shouldn’t be discouraged about the prospect of building projects.

Some difficult times remain ahead, and the recovery isn’t going to happen tomorrow, but Myers, president of Thomas & Mack Development Group in Las Vegas, said the development prospects have improved because land prices are resetting.

“I wish I could tell you it is all going to be back tomorrow, but it is headed in the right direction,” he said.

Myers, who has worked with banks on selling vacant commercial land, said land that once sold for as much as $18 a square foot has sold for $4 a square foot.

“The reset is happening, and it is going to continue to happen,” Myers said. “We have sold about 30 properties on behalf of banks and those numbers are coming down. That is a good thing because now you can make some sense out of development.”

Las Vegas isn’t like other parts of the country where projects can make sense even though land prices rise, Myers said.

“Remember the talk about the Manhattanization of Las Vegas?” Myers said. “I don’t want to pick on anyone, but we don’t have the Hudson River and East River and the San Francisco Bay. That whole idea that we can pay whatever we want on land, and it’s not going to impact us — it does have an impact.”

Myers said people shouldn’t be confused by the high office vacancy rate in Las Vegas because it’s not about the overall market, but how each sector of the office market is performing.

“There are some great opportunities out there. Some of the numbers skew what’s happening,” Myers said.

Having 3.4 million square feet of vacant space in Las Vegas is meaningless when talking about large buildings, for example, because empty space may be competing against just three or four other projects.

A tenant eyeing 50,000 square feet of space isn’t going to go in five buildings measuring 10,000 square feet each, but choose one large building instead, Myers said.

“Even though there are some daunting numbers out there, it is very likely that some of these buildings are only a transaction away (from cutting their vacancy rate),” Myers said.

At the same time, Myers said a lot of office complexes that were built for investment-driven reasons are so “out of whack with their economics and location, that you might as well bulldoze them.” Those properties won’t be competing with much of the vacant space on the market, he said.

It doesn’t take much of a reduction in rents to turn a project upside down and once it reaches that point, owners will start handing over the properties to the bank, Myers said.

In other news

• The International Council of Shopping Centers has awarded Fashion Show mall, the Grand Canal Shoppes at the Venetian and Shoppes at the Palazzo two silver-medal U.S. Maxi Awards in its annual competition. The awards honor premier marketing, community outreach, sales promotion and visual merchandising programs. Town Square won two gold awards, in the public relations and alternative revenue categories. The Galleria at Sunset mall won a gold award in the integration category. It was honored for its multidiscipline program “Galleria Library Branch,” in which it created an in-mall library.

• The council will hold a seminar April 8 to talk about distressed commercial property. The program starts at 5:30 p.m. at Panevino, 246 Via Antonio. For more information, call Jared Bergquist at 521-9953.

• Terra West Property Management has launched a fundraising campaign on Facebook. For every person who becomes a fan on the social networking site through the end of March, Terra West will donate $5 to the Childhood Cancer Foundation’s Camp Cartwheel. It is a medically supervised summer day camp designed to help children with cancer and other illnesses, along with their siblings, to overcome the physical, mental and emotional obstacles incurred by childhood disease.

• An investment fund managed by URDANG, the real estate investment manager and part of BNY Mellon Asset Management, has made a participating loan to Ridgeback Partners for its acquisition of 291 finished lots and 17 homes in the Hillside development north of Summerlin. The property was purchased from a consortium of banks, which had taken control of the asset in November 2008. The terms were not disclosed. The company said the plan is to sell the completed homes in bulk to investors or to homebuyers and sell the lots to homebuilders when the market shows signs of recovery.

• The state Real Estate Division has suspended the license of real estate agent William Heath II. The division announced that through an investigation with the Henderson Police Department, Heath is accused of pawning jewelry stolen in the course of real estate-related business. A complaint will be heard by the Nevada Real Estate Commission.