Nevada’s Retail Market

Remains Resilient Despite Economic Downturn

April 02, 2008 - Nevada’s population boom and resilient economy have kept retail demand high, despite a statewide housing downturn. The state economy was home to 1.29 million jobs in the final quarter of 2007, with 5,300 new retail positions created by the holiday shopping season. Nevada is forecasted to see a 5 percent job growth by the decade’s end.

“There is reason to be optimistic about Nevada’s long-term economic outlook,” said Bill Anderson, chief economist of the Nevada Dept. of Employment Training and Rehabilitation. “While the news of late has not been encouraging, a developing megaresort boom, coupled with a likely improvement in the housing sector is the reason for the positive forecast.”

Southern Nevada is fueling the state’s economic engine with $41.4 billion of hotel, casino and convention construction underway through 2012, reports the Las Vegas Convention and Visitors Authority. Those numbers could grow even greater as another $25.97 billion of tentative projects are now planned for development. The Las Vegas Valley’s retail market reflected the region’s upbeat optimism with a low 3.2 percent vacancy at the end of 2007, despite adding 4.3 million square feet of new space over the last year, reports Applied Analysis, a Las Vegas-based business advisory firm. Southern Nevada had 48.7 million square feet of retail space in the fourth quarter, with an impressive 1.5 million square worth of absorption.

“The majority of new product has been pre-leased and overall supply and demand has remained fairly well balanced,” said Brian Gordon, principal of Applied Analysis. “Although consumer spending remains an area of concern, the current building boom on the Strip will be a key driver of population, visitation and employment growth, and, ultimately, retail spending.”

There was 2.4 million square feet of new retail space under construction in the fourth quarter, with grocery-anchored neighborhood shopping centers accounting for the bulk of the activity. Wal-Mart, for instance, has two supercenters under construction totaling 422,000 square feet in the Las Vegas Valley. The Bentonville, Ark.-based retail giant already has a substantial Nevada presence with 25 supercenters, four discount stores, 12 neighborhood markets, 7 Sam’s Clubs and one distribution. Wal-Mart currently employs 14,572 associates in Nevada. Global rival Tesco PLC, however, Britain’s largest retailer, is looking to make a similar slash by opening 15 stores in Southern Nevada over the next couple of years. Tesco’s “Fresh & Easy” store is a 10,000-square-foot neighborhood grocery with an assortment of general merchandise.

“Retail is one of the commercial sectors with great growth potentials,” said Zack Hussein, a senior retail associate with CB Richard Ellis Las Vegas. “Many developers pack in as many homes as possible leaving little space available for residential retail services. It has resulted in a pent-up demand for those services.”

Regency Centers Corp., for instance, is developing Deer Springs Town Center next to Olympia Group’s 2,000-acre Park Highlands master-planned community. The 32-building, 700,000-square-foot retail center is located at the southeast corner of North Fifth Street and the Beltway in North Las Vegas. It’s located inside one of the nation’s fastest-growing ZIP codes with 160,000 people within a five-mile radius. The center will be anchored by a 132,360-square-foot Target, a 106,278-square-foot Home Depot and a 65,000-square-foot Babies “R” Us. Junior anchors are PetSmart, Ross and Staples. The 60-acre complex is scheduled to finish construction in March 2009. Jaynes Corp. is the general contractor; Perkowitz + Ruth are the architect.

“The residents in the immediate surrounding areas have been traveling miles to shop for major brands,” said Mike Leonard, Regency’s vice president of investments. “Now, they can shop in a convenient location, which will offer goods and services from more than 130 merchants.”

Territory, Inc. is developing the 300,000-square-foot Cannery Corner at the northeast corner of Craig and Losee roads in North Las Vegas. Roughly 344,604 residents live within a five-mile radius of the big-box shopping center. The nine-building, Sam’s Club anchored complex features such tenants as Winchell’s Tavern, Community Bank of Nevada, T-Mobile, and Chipotle, among others. It’s scheduled to open in the first quarter. Territory is additionally building the 350,000-square-foot Centennial Gateway at the northwest corner of U.S. Highway 95 and Ann Road in Las Vegas. The project is a joint-venture with the Schwartz Family and Olympia Development. Territory recently signed two major tenants, including 24-Hour Fitness and Sportsman’s Warehouse. The project’s second phase is scheduled to open in mid-2008.

“New retail trade areas will continue to emerge in outlying suburbs near recently developed master-planned communities and the metro’s improving roadways,” said John Vorsheck, Marcus & Millichap’s Las Vegas regional director. “While overall vacancy is forecasted to trend higher, pockets of the Las Vegas market remain underserved.”

ManhattanWest, for instance, is taking shape inside the underserved southwest Las Vegas submarket. The $350 million, 12-building complex is located at the southwest corner of Russell Road and the I-215 Beltway. The project combines 700 condominium residences with 195,000 square feet of office and retail space. It’s being built by Gemstone Development, the same firm responsible for the 700-unit Manhattan condominium complex on the South Strip. Plans call for 150,000 square feet worth of Class A office space and 43,000 square feet of ground-level retail space, with roughly 30 stores and four restaurants. Phase one, which consists of five buildings (two commercial, three residential), is already under construction. ManhattanWest is expected to open in the third quarter of 2008, and finish by mid-2009.

Triple Five Nevada is similarly developing a mixed-use project in the underserved northwest Las Vegas Valley. The firm has revamped plans for its Great Mall of Las Vegas. The development, which was once touted as Southern Nevada’s first enclosed shopping mall in more than two decades, will now be an open-air center. The $800 million complex will be located at the northeast corner of Grand Montecito Parkway and Deer Springs Way, adjacent to U.S. Highway 95.

The Great Mall will now consist of more than 25 individual, single-story outdoor buildings instead of a three-level air-conditioned mega-structure as originally announced. Plans additionally call for two, 200-foot-tall concrete-and-glass residential buildings combining for roughly 800 homes. The 50-acre project had initially called for 1.575 million square feet of commercial office and retail space, with 250 shops and stores, but those plans have since been trimmed by one-third. The revised scheme entails 1 million square feet with 185 stores and 16 restaurants.

The mall will have national name tenants including a movie theater, bookstore and grocer. There will also be office space, although the final amount remains undetermined. The Great Mall of Las Vegas is expected to open by October 2010, attracting more than 20,000 people daily.

Triple Five compares its revamped project with other mixed-use lifestyle developments such as the newly opened Town Square – a $750 million, 117-acre mixed-use development at Las Vegas Boulevard, South, and the Las Vegas Beltway. The project is a joint-venture between Turnberry Associates and Centra Properties. The 1.5 million-square-foot complex will eventually consist of 150 shops, 12 restaurants and 350,000 square feet of office space. The 22-building Town Square continues to welcome tenants in phases, with Robb & Stucky, Tommy Bahama’s Emporium, J. Crew and Brio Tuscan Grille opening their doors in February. The Yard House, Tommy Bahama’s Tropical Café, Ann Taylor, Ann Taylor Loft, Borders, Teavana, MAC, LeSportsac, and Blue Martini debuted in March.

“Town Square is a one-of-a-kind shopping and entertainment destination for a better visitor experience that will make people more likely to stay longer and return again,” said Mike Wethington, Town Square’s general manger. “For an office owner and their employees, Town Square will offer an unparalleled level of amenities. If you have a lunch meeting, all you have to do is walk downstairs.”

PLISE Development & Construction is adopting a similar strategy with its $2 billion City Crossing project. Vertical construction is now underway on phase one of the 126-acre mixed-use development at the southwest corner of St. Rose Parkway and Executive Airport Drive in Henderson. The first 50-acre phase consists of an 8-story, 225,000-square-foot Class A office building, plus 95,000 square feet of lifestyle retail space, 180 residential units and a 160-room hotel.

City Crossing will have a combination of lifestyle and entertainment space ranging from stand-alone pads, inline shops and boutiques. It will feature major national tenants, a movie theater, a fitness center and a spa, along with outdoor plazas, broad sidewalks and lush landscaping to encourage pedestrian interaction with 25 acres of parks, trails and other recreational open space. The master-planned campus will service such surrounding residential communities as Southern Highlands, Inspirada, Seven Hills, Anthem, Sun City, and Silverado Ranch.