1. 1ST QTR
RETAIL MARKET
REPORT 2010LAS VEGAS, NV
1ST QTR
RETAIL MARKET
REPORT 2010
Commerce Real Estate Solutions • 3800 Howard Hughes Pkwy, Suite 1200 • Las Vegas, NV 89169
2. 1st QTR Retail Market Report Commerce | Las Vegas, NV
www.comre.com2010
Our Vision
We are the firm of choice - a real estate advisor and principal - the global standard for knowledge, service,
and execution.
National and State Employment and
Unemployment Overview
National unemployment rates reached a 28 year high at
10.4%, roughly 11 million unemployed workers that are
now drawing unemployment insurance benefits. In February
alone, 27 states recorded unemployment rate increases. The
highest regional jobless rates were in the Western part of
the country, while the Northeast recorded the lowest rates.
Michigan again recorded the highest unemployment rate
among the states, 14.1 percent in February. The states with
the next highest rates were Nevada, 13.2 percent; Rhode
Island, 12.7 percent; California and South Carolina, 12.5
percent each; and Florida, 12.2 percent. The Las Vegas
economy continues to be impacted by downturns and high
employment rate, currently 13.9%, in all major sectors,
including gaming, construction, financial and real estate.
The recession will most likely be a “jobless recovery.”
Since World War II there have been a total of 11 recessions
and in the most recent recessions before the 2007 recession,
job growth lagged long after the recession. In fact it took
several years for the unemployment rate to return back to
prerecession levels. Employment growth is critical to future
economic growth and the return to a healthy commercial
market which may take several years to accomplish.
At A Glance
Vacancy Rates Reached New Highs
Overall vacancy rates reached another high during the quarter at 13.64%.
This is a 0.62% jump from 4th quarter 2009 and a 6.24% raise from a
year ago. Anchorless Strip product type is showing the highest vacancy
rates at 21.15%. Vacancy increases during the year were impacted by
several store closings due to the current economic conditions.
Rents Fall Again
As Landlords are faced with a “Tenant” market, they are seeing many
retailers renegotiating for lower rents and asking for more concessions
as their leases come up for renewal. Negotiations like these and more
up-front incentives help stabilize and even lower the overall average
lease rates. Currently, the Las Vegas market is showing annual averages
lease rates at $1.74 per square foot (psf). This is a drop from last quarter
at $1.85 psf and higher of a drop from a year ago when rates where at
$2.15 psf.
Challenging Outlook for Las Vegas Continues
Looking forward, the retail sector is expected to continue to face
challenges posed by a troubled employment market, low consumer
confidence levels and a still struggling housing market. Vacancy rates
are expected to continue upward into the foreseeable future. The task
of identifying tenants who have a need for space in some of the larger
units and filling more than 7.4 million square feet of available product
will be difficult in the next year.
Retail Market Indicators
Current
1Q10
Change
Since
1Q09
Vacancy 13.64%
Lease Rates (NNN) $1.74 NNN
Net Absorption* (446,568)
Construction N/A
*The arrows are trend indicators over the specified time period and do
not represent a positive or negative value. (e.g., absorption could be
negative, but still represent a positive trend over a specified period.)
-1%
1%
3%
5%
7%
9%
11%
13%
15%
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
Las
Ne
US
Un
-1%
1%
3%
5%
7%
9%
11%
13%
15%
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
Las Vegas – 13.9%
Nevada – 13.2%
US – 9.7%
Unemployment rates 1Q10
3. 1st QTR Retail Market Report Commerce | Las Vegas, NV
www.comre.com2010
Our Vision
We are the firm of choice - a real estate advisor and principal - the global standard for knowlege, service,
and execution.
Las Vegas Market Overview
As we start the New Year, the big question on everyone’s
minds is what is going to happen next and will the signs of
recovery start to show and what will it look like for the Las
VegasMarket.Expertsaroundthenationbelievethatrecovery
will start to show by early 2011 and in some areas may have
already hit rock bottom. UNLV Economics Department
Chairman, Dr. Stephen Miller says “improvements in taxable
sales, gaming revenue and McCarran Airport passenger
counts are good indicators of an improving economy (for the
LasVegasmarket).”Millergoesontostatethat“alotofthings
are happening locally that are suggestions that the economy
is trying to reach bottom and turn around.” While Southern
Nevada’s local economy may be starting to see the bottom
of the commercial recession period, some experts are still
analyzing declining property values, maturing commercial
loans, ownership vs. leasing, the benefit of receiverships and
the local business activity.
According to Kenneth P. Riggs, President and CEO of RERC,
“The past decade has served up some tough lessons about
acting on our gut instincts and about what makes sense and
what simply does not fit with sustainable practices. But for
investors seeking to seize market opportunities, 2010 is time
to gear up for a possible once-in-a-lifetime opportunity to
snag key long-term investments in commercial real estate.”
In 2010, with leasing activity lagging, we are seeing more
landlords willing to hang “For Lease” and “For Sale” signs
on their buildings. John Kulper, president of Commercial
Alliance of Realtors, wrote “While lenders generally are
avoiding investment real estate, owner-occupied commercial
real estate is beginning to look attractive again.” Real
Capital Analytics also agrees stating that “owner-occupied
purchase now represent almost 10% of global transactions
and will be involved in a greater share of property deals.”
In a recent study, most commercial brokerage firm’s
executives believe that “real estate prices now make it more
financially advantageous to buy rather than lease.” In the
Las Vegas market, commercial property values and asking
rates continued to fall this quarter which may help with the
decision to either buy or lease.
The Federal Government is also monitoring the weakness
of the commercial real estate market. The Feds believe that
the weakness of commercial loans is a very serous problem
becausethewholeeconomycouldbehit,muchlikethehousing
bust has caused. Troubled commercial real estate loans could
be the primary force behind bank failures this year. Elizabeth
Warren, chair of the TARP Congressional Oversight panel
stated that “around half of all commercial mortgages will be
underwater by the end of 2010, posing a very serious problem
for the economy over the next three years.”
The Las Vegas Retail Market
Vacancy
By end of the quarter,
vacancies reached new
highs with approximately
7.48 million square feet
of vacant product coming
online. This equates to a
13.64% vacancy factor.
Above-average vacancies
were noted in the North Las Vegas (19.74%), Central East
(14.70%), and Henderson (27.31%) submarkets. By product
type, Strip Center (21.15%) and Neighborhood Center
(14.37%) retail buildings posted the highest vacancies at
the end of the quarter as discretionary spending pulled back,
further impacting the viability of small business owners.
Summerlin at 7.24% and Central West at 8.93% posted the
lowest vacancy rates. The retailers that are pulling through
the recession have enjoyed the current vacancy and the
old time saying “location, location, location” really means
something right now to the retailers that can make the move
to more premier locations as rental rates are lowered and
become more affordable.
4. 1st QTR Retail Market Report Commerce | Las Vegas, NV
www.comre.com2010
Our Vision
We are the firm of choice - a real estate advisor and principal - the global standard for knowlege, service,
and execution.
Retail: Quarterly Vacancy
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
Q
106
Q
206
Q
306
Q
406
Q
107
Q
207
Q
307
Q
407
Q
108
Q
208
Q
308
Q
408
Q
109
Q
209
Q
309
Q
409
Q
110
Retail Space Vacancy Rates
Central West,
8.93%
East, 15.74%
Henderson, 27.31%
Nellis, 10.71%
North Las Vegas,
19.74%
Northwest, 12.57%
Southwest, 13.45%
Summerlin, 7.24%
Central East,
14.70%
Green Valley,
12.96%
Retail Vacancy by Type
Anchorless Strip,
21.15%
Community
Centers, 12.23%
Neighborhood
Centers, 14.37%
Freestanding,
2.37%
Retail: Inventory (SF) and Vacancy Rate (%)
30,000,000
35,000,000
40,000,000
45,000,000
50,000,000
55,000,000
60,000,000
Q
106
Q
206
Q
306
Q
406
Q
107
Q
207
Q
307
Q
407
Q
108
Q
208
Q
308
Q
408
Q
109
Q
209
Q
309
Q
409
Q
110
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
Retail: Vacancy (%) and Ave. Lease Rates
$2.03
$1.92
$1.94
$1.82
$1.54$1.67
$1.49
$1.99
$1.33
$1.64
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
CentralEast
CentralW
est
East
G
reen
ValleyHenderson
Nellis
North
Las
Vegas
NorthwestSouthwestSum
m
erlin
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
Retail: Quarterly Absorption (SF)
(4,000,000)
(3,000,000)
(2,000,000)
(1,000,000)
-
1,000,000
2,000,000
Q
106
Q
206
Q
306
Q
406
Q
107
Q
207
Q
307
Q
407
Q
108
Q
208
Q
308
Q
408
Q
109
Q
209
Q
309
Q
409
Q
110
Retail Space Vacancy Rates
Central West,
8.93%
East, 15.74%
Henderson, 27.31%
Nellis, 10.71%
North Las Vegas,
19.74%
Northwest, 12.57%
Southwest, 13.45%
Summerlin, 7.24%
Central East,
14.70%
Green Valley,
12.96%
Retail Vacancy by Type
Anchorless Strip,
21.15%
Community
Centers, 12.23%
Neighborhood
Centers, 14.37%
Freestanding,
2.37%
5. 1st QTR Retail Market Report Commerce | Las Vegas, NV
www.comre.com2010
Our Vision
We are the firm of choice - a real estate advisor and principal - the global standard for knowlege, service,
and execution.
Retail: Quarterly Vacancy
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
14%
15%
Q
106
Q
206
Q
306
Q
406
Q
107
Q
207
Q
307
Q
407
Q
108
Q
208
Q
308
Q
408
Q
109
Q
209
Q
309
Q
409
Q
110
Pricing (Average Asking Rent)
Weak consumer spending and troubled employment
continues to force many businesses to close and the demand
for retail space is shrinking. This activity has lowered the
average asking rents around the valley. Average asking rents
witnessed another decline to $1.74 per sf/mo NNN during 1st
quarter 2010, which was slightly below the $1.82 per sf/mo
NNN reported in the preceding quarter (Q4 2009) and further
below the $2.15 per sf/mo NNN reported one year ago. The
amount of product available at year-end represented an all-
time high, which will likely contribute to continue softening
in retail prices.
New Supply (Completions) and Market Demands
Developers have halted many projects resulting in no new
construction completions during first quarter. With the
continued hesitation of developers to build product, due to
scarce construction financing and weak rents, we also don’t
expect much of the planned product to come online any time
soon. Future new supply levels will continue to shrink as
market corrections are underway. It may take another five
years for the housing market to become stable, credit to start
flowing and employment to become active again before any
rise in construction numbers. For a smart recovery, the retail
market needs to solve the imbalance of supply and demand
by allowing existing vacant space to be absorbed and wait out
this business cycle before any major growth should happen.
Outlook
In the coming months we expect commercial real estate prices
to decline further and not see any true recovery until the end
of the year to early next year. The market will continue to
be impacted by cautious consumer and company activity,
causing vacancies to remain elevated and most likely continue
to increase. Rents will also continue to be impacted by the
currenteconomyandwillcontinuetofall. Inareportproduced
by UNLV’s CBER, “Southern Nevada business will continue
to struggle with the after effects of the deepest recession in the
US since the Great Depression. To date, Southern Nevada has
not enjoyed the same level of increase in business activity as
the rest of the US.” The local economy will not pick up until
we see robust growth in hiring and according to the survey,
with only 10% of businesses anticipated to hire more workers,
the recovery will be very slow for the Las Vegas area. We
are optimistic going into 2010 that the bottom is near and
compared to last year, vacancy is not rising and lease rates are
not falling as fast or as far as we were witnessing.
Looking forward, incremental job growth is anticipated to be
limited, with nearly every sector pointing toward continued
contraction in 2010. Income and spending levels are also
likely to remain depressed, as consumers pull pack in the face
of uncertainty. These conditions will force retailers to shift
their business models back to the pre-boom era, a change that
can be difficult to achieve. That said, opportunities for those
seeking expansion or entrance into the Las Vegas market over
the next several years should be attractive from a pricing
perspective.
Las Vegas Retail Overview 2005-2010 YTD
7.40%
3.90%
13.64%
4.31%
3.71%
13.02%
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
2005 2006 2007 2008 2009 2010
$1.75 $1.92 $2.04 $2.15 $1.85 $1.74
44.50 48.73 50.06 50.40 55.88 54.91
Year
Ave Lease Rate
Base * Sf Millions
SquareFeet
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
18.00% Vacancy
Built Vacant Inventory Vacancy
6. 1st QTR Retail Market Report Commerce | Las Vegas, NV
www.comre.com2010
Our Vision
We are the firm of choice - a real estate advisor and principal - the global standard for knowlege, service,
and execution.
Rules for Market Review
Only existing properties, for lease >=20,000 square feet are included in the market reviews
TYPE
REGIONAL MALL ................................................ENCLOSED MALL
REGIONAL CENTER.............................................>= 350,000 SF
COMMUNITY CENTER ........................................>= 100,000 AND <= 349,999 SF
NEIGHBORHOOD CENTER ................................>= 50,000 AND <= 99,999 SF
ANCHORLESS STRIP ............................................<=49,999 SF
FREESTANDING ...................................................FREESTANDING
Las Vegas Retail Submarket Map
8. 1st QTR Retail Market Report Commerce | Las Vegas, NV
www.comre.com2010
Our Vision
We are the firm of choice - a real estate advisor and principal - the global standard for knowlege, service,
and execution.
Commerce | full service commercial real
estate solutions
Commerce Real Estate Solutions has been among
the top commercial real estate brokerage firms in
the Intermountain West for over 30 years. From our
headquarters in Salt Lake City and offices in Provo/Orem,
Clearfield and St. George, Utah, Las Vegas, Nevada and
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Meeting your real estate objectives is our number one
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That means you’re getting an experienced agent when
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standard-bearer in mapping, Graphic Design and
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At Commerce we have a complete understanding of the
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Doing business in a brisk and nuanced marketplace is
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Cushman & Wakefield
Cushman & Wakefield is the world’s largest privately-
held commercial real estate services firm. Cushman
& Wakefield is the world’s largest privately-held
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it has 231 offices in 58 countries and 15,000 employees.
The firm represents a diverse customer base ranging from
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