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the magazine for southern nevada commercial real estateMAY 2009Sponsored byFOCUS ON:RETAILSUPPLEMENT TO IN BUSINESS LAS VEGAS
Gatski Commercial Real Estate Services is a team of professionals anchored by integrity, character andan unwavering commitment to our clients–managing and maintaining their investments from acquisitionto disposition. Our industry is commercial real estate, our focus is our relationships and our objective is togrow old with our relationships. Bringing our clients’ financial goals to reality is what we are about.Visit us online at gatskicommercial.com or contact a representative today at 702.221.8226.THE FOUNDATION OF OUR BUSINESSIS BUILDING STRONG RELATIONSHIPS.IndustrialPROPERTY MANAGEMENTOfficeRetailINVESTMENT SALES & LEASINGLANDSCAPE & BUILDING MAINTENANCEFLOORING DIVISION
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the magazine for southern nevada commercial real estateMay 2009Inside1811Retail on the StripStrip retailers show vulnerability in economic downturnbut continue to draw millions of shoppers.17Big-box vacancy18Town SquareBig-box tenants adapting to changes in retail broughton by recession in order to survive.The open-air lifestyle center, which boasts a gatheringspot reputation, is a big hit with all.202123Tivoli at QueensridgeDevelopers stall opening of mixed-use project untileconomy improves.Costco Business CenterCostco finds way to set itself apart by offering locations that serve the needs of local business owners.Getting to KnowSenior Associate Penny Mendlovic of CB Richard EllisRetail Services talks about the retail climate in the city.REALTY CHECK n n nMeet the ExpertsJohn RestrepoPrincipal — Restrepo Consulting Group7John Restrepo has provided economic consulting services in Nevada for 20 years.Restrepo Consulting Group is based in Las Vegas and is the oldest and most establishedeconomics and public policy research firm in Nevada. The firm’s clients include manyprominent private and public organizations concerned with land use and growth.Restrepo also has been preparing detailed quarterly market surveys that track the LasVegas Valley’s industrial, office and retail markets since 1990.Kit GraskiSenior Vice President – Voit Real Estate Services164A retail expert with 24 years of experience working in one of the strongest and mostprosperous retail markets in the country, Kit Graski’s extensive client list boasts wellknown retailers, including The Home Depot, Bed Bath & Beyond, Borders, FamousFootwear, Sports Chalet, Food 4 Less, JCPenney and Men’s Wearhouse. He is one of thetop-producing retail brokers in Las Vegas and in the country. In 2008, Graski was thetop producer at Voit’s Las Vegas office and the second-highest producer companywide.Despite 2008’s soft market, he closed 16 transactions totaling 28.5 million, which includedmore than 645,000 million square feet of product.
FROM THE EDITORPUBLISHERBruce Spotlesonbruce@gmgvegas.comASSOCIATE PUBLISHERDebbie Donaldson (990-2457)EXECUTIVE AssistantKenya Johnson (990-2443)EditorialSpecial Publications EditorRob LangrellMANAGING EDITORSPat TeagueCarla J. ZvosecSTAFF WRITERsMark HanselBrian SodomaCREATIVEEditorial DESIGNERBradley SamuelsADVERTISING CREATIVE DIRECTORJoe BoswellADVERTISINGAccount ExecutivesLaura Alcaraz (990-8948)Allen Grant (990-8991)Ashley Sornsen (990-8170)Jim Villela (990-7735)ACCOUNT COORDINATORSue Sran (990-8911)PRODUCTIONVice President of ManufacturingMaria BlondeauxProduction MANAGERBlue UyedaProduction supervisorPaul HuntsberryProduction AssistantMarissa Gabletraffic MANAGERJanine Hughestraffic AssistantKristy KomornyCIRCULATIONSENIOR VP – MARKETING & DISTRIBUTIONKris DonnellyDIRECTOR OF CIRCULATIONRon GannonDISTRIBUTION MANAGERFULFILLMENT MANAGERMatt HemmerlingDoris HollifieldGREENSPUN MEDIA GROUPchairman of the boardPresidentDaniel A. GreenspunMichael T. CarrSENIOR DIRECTOR, HUMAN RESOURCESJohn OttoneVice President of PR & PROMOTIONSKelli MarucaThe largest retail real estate conference in the world is coming totown next week.More than 25,000 shopping center professionals from around theworld will converge on Las Vegas for RECon — The Global Retail RealEstate Convention. The International Council of Shopping Centers holdsits spring convention annually at the Las Vegas Convention Center, andthis year, it runs May 17-20.RECon gives the world’s top shopping center owners and developers,financial companies, brokers, retailers and public sector companies theopportunity to network, discuss strategies and,simply, do business. More than 1,800 exhibitorswill set up across about 2 million square feet inthe trade exposition and leasing mall.Plus, there will be about 150 exhibitors in the“Green Zone” this year. That area focuses on thegrowing trend of sustainability.Attendees will have plenty of deal-makingopportunities, as well as the chance to shopfor the latest products and services and attendeducational sessions taught by industry experts.For more information on the convention, visitwww.icsc.org.This edition of CRE places a focus on the state of the retail industryin Southern Nevada. You’ll get updates on projects that have openedduring the past year, such as Town Square, The Shoppes at ThePalazzo and the retail aspects of Encore and Wynn.Additionally, you’ll get a sneak peak at some of the latest retaildevelopments planned here. You’ll find stories about Tivoli Village atQueensridge, Fontainebleau and Crystals at CityCenter.Check out our popular “Realty Check” columns, too. This is where weshowcase the viewpoints of some of the top real estate experts in thecity. If you are looking for insight from some of the industry’s top localnames, you can find it here.Enjoy learning about the future of the retail market in the Las VegasValley. We have some of the world’s greatest shopping centers righthere in our backyard. Join the people worldwide who already know it’sa great place to shop. Rob LangrellSpecial Publications Editorrob.langrell@gmgvegas.com(702) 990-249005 095
FROM THE SPONSORSDear In Business Las Vegas reader,This month, the International Council of Shopping Centerswill be in town for RECon — The Global Retail RealEstate Convention. It’s a wonderful opportunity to shownational tenants the spaces we have and how our business modelhas shifted with the changing times.Retail now represents about one-thirdof our company’s commercial real estateportfolio. Everyone saw the office-marketvacancy rise, and retail is following. It’salarming to see established tenants that havebeen in this market for years — nationalcredit tenants — vacate or go out of business.We’re bringing together tenants, landlordsand lenders for candid conversations about the economy andthe positions they hold in the commercial real estate industry.We see this as an opportunity to facilitate a strategy whereall three components are able to cooperate, compromise andwork through tough economic times together.We’ve also taken the opportunity to enhance our servicesin the following areas: New cost segregation division and services. Cost segregationis the IRS-approved method for accelerating the depreciationof nonstructural components and improvements of a building,which reduces tax liability and increases cash flow. New focus on providing services for bank-ownedproperties and properties in receivership. We have about200,000 square feet of commercial space in this new area,and with recently added activity from receiverships, ourportfolio is now at 7 million square feet. With the structureof our company offering maintenance services in-house, weare staffed to handle all aspects of management in a verycost-effective manner, which is proving valuable to lendersunfamiliar with property management.It’s important to note that, although times are challenging,deals are still being made. Opportunities abound, and we arestill seeing investor interest in our market. Our focus remainson building relationships for future opportunities.Best personal regards,Dear In Business Las Vegas readers:Cox Business is proud to be a continued sponsorof the In Business CRE supplement, and wevalue the opportunity to reach out to businessesin our local community. Now, more than ever, smarttelecommunications systems are crucialto managing your business’ efficiency,productivity and success. More than that,it’s about determining what your customtelecommunications needs really areand then finding specific solutions thatare as flexible as they are effective. Tomeet that expectation, Cox Business ispleased to introduce VoiceManager — anew phone product that gives you greater control andcustomization.Cox Business VoiceManager is the next evolution ofphone products letting you cut the cord to your officephone by managing it through your computer. Thisnew, feature-rich, expandable service platform requiresminimal installation and upfront investment.VoiceManager begins by putting the advancedcapabilities of a central telephone exchange on yourdesktop computer in the form of a hosted PBX system— a luxury that always had been hard to arrangefor smaller companies. Then, we give you a simpleuser interface that organizes features intuitively.Cox Business VoiceManager allows every featureand function of your office phone system to be easilymanaged by you at your convenience, in real time, withthe click of a mouse.With Cox Business VoiceManager, you have newoptions in managing your phone traffic. And, as thecase with all our services, VoiceManager is maintainedlocally 24/7/365 with the award-recognized customersupport you expect from Cox Business.Every time the phone rings, your employees are onestep ahead. Now, with Cox Business VoiceManager, youare in greater control of exactly how that phone will ringto your advantage. Visit www.coxbusinessvoicemanager.com to learn more. We look forward to contributingto the continued success and growth of the SouthernNevada business community.Frank Gatski, CPM, CCIMPresidentGatski Commercial Real Estate Serviceswww.gatskicommercial.com6Steve CostaVice President of Sales & MarketingCox Business Las Vegas
REALTY CHECK n n nJohn Restrepo, Principal, with John Donovan and Maria Guideng, Researchers, Restrepo Consulting Group LLCValley’s anchored market fallsvictim to economic downturnThe Las Vegas Valley’s economy remains inthe midst of one of the most severe downturnsin U.S. history. The culprits are the collapseof the local housing market, massive job losses andthe frozen credit markets. Consequently, the valley’sanchored retail market, such as the office and industrialmarkets, has not been able to avoid the turmoil.For many years, the region’s anchored market wasone of the most vibrant and strongest in the region, ifnot the nation. That has now changed. The housingmarket crash, combined with the drop in consumerconfidence and spending, has caused the valley’sanchored retail centers to see a steady rise in vacancyand a downward trajectory in rents. A look at our localeconomy should shed some light on where the valley’sanchored market is headed in 2009.Total Job ChangeIn February, the Nevada Department of Employment, Training and Rehabilitation reported thatClark County lost 41,400 establishment-based jobscompared to February 2008, dropping 4.5 percentto 880,000. Additionally, February’s jobs were1,400 less than this January’s numbers, making theJanuary-February decline a vast improvement overthe 18,300 December-January drop, and while thisis an encouraging sign, it is not a trend. Since thebeginning of 2009, 19,700 residents of Clark Countyhave lost their jobs.Regarding Clark County’s unemployment rate, theofficial report estimate was 10.1 percent in February, anear doubling of the 5.1 percent recorded in February2008, or a jump of 98 percent. At the same time, ClarkCounty’s labor force grew by 4.3 percent, from 971,900to 1,013,700. The reasons: college graduates enteringthe job market, retirees returning to work because offinancial need, nonworking spouses seeking work andpopulation growth.Job Change, By IndustryThe DETR reported the loss of 44,800 jobs in eightof the 11 major employment sectors (Other Servicessaw a gain last month) compared to February 2008.As noted, this is a slight decline compared to whatwe saw in January versus January 2007. Once again,most of the losses were in Leisure and Hospitality,followed by Construction; Professional and BusinessServices; Trade, Transportation and Utilities; FinancialActivities; and Manufacturing and InformationServices. Natural Resource jobs remained unchanged.There were 3,400 jobs added in two of the 11sectors, year-over-year. The largest gains were inEducation and Health, followed by Government.As mentioned, the result was a net job loss of05 097
REALTY CHECK n n n4WUc S ]\S1VO\US W\ 1ZO Y 1]c\bg S[ Z]g[S\b Q][ O SR b] SdW]ca 4SP cO g " 3[ Z]g[S\b U ]ebV bV]caO\Ra 8]P U ]ebV Q]\bW\cSa aZWRS #"!!"!"# %&'GSO b] gSO QVO\US T ][ 4SP cO g b] 4SP cO g41,400 jobs versus February 2008. Inthe case of Education (including privatecolleges like the University of Phoenix)and Health employment, there were 2,600additional jobs compared to February 2008,representing 76 percent of the job gains.Unemployment Claim FilingsThe state of Nevada recorded almost 101,000initial unemployment claim filings in ClarkCounty during the 12-month period endingFebruary 2009. Southern Nevada is now inuncharted waters, with annual unemploymentclaims exceeding 100,000 in February. Thisreflected the highest, largest, rolling yearover-year change (70 percent) in the lastseven years. Additionally, the same-month,previous-year change in February was 75percent above the February 2007-2008 period(the change this January was 70 percent).Until this indicator shows a persistent declineof at least six months, the state and localeconomies will remain in recession.Again, the significant problems facingthe Southern Nevada resort industry thatemerged in February do not bode well fora steady decline in monthly unemploymentclaim filings in 2009 and probably intothe first half of 2010. Time will tell, andwe continue to monitor this indicator veryclosely each month.Hopefully, the rates of monthly filings wesaw in 2008 and into February will not berepeated for the remainder of 2009. However,at this point, we are not seeing a decline inthe rate of increase each month.Median New Home & Resale PriceRecent numbers released by Home BuildersResearch show a 38 percent drop in the8median resale home price and 19 percent inthe median new home price in Clark County,when comparing February 2009 to February2008. As noted previously, until this essentialindicator shows an upturn of at least sixmonths, the housing market will remaintroubled, prolonging the recession. That said,it is good news that the decline in new homeprices is starting to moderate. This is largelydue to the dramatic decline in housing starts.As noted, the one bright spot in this Godawful mess, is that housing affordability hasimproved considerably. February’s mediannew house price of 220,700 is back to justbelow the March 2004 level of 225,000. In thecase of resales, January’s price of 145,000is now near the 145,900 recorded in April2002. Essentially, five to seven years of equity,some of it real and some of it paper, has beenwiped out by the housing crash. In the longterm, a return to some level of affordability isvital to the region’s quality of life. However,in the short to intermediate terms, it isvery traumatic to consumer and businessconfidence — crucial prerequisites to SouthernNevada’s recovery.HBR reported 2,606 resale home closingsthis February versus 1,529 in February2008, the same rise as January (70 percent).However, according to Salestraq, 63percent of home sales were bank-ownedin February. That’s why we continue tosee a decline in the median price. In thecase of new home closings, there were375 units sold in February 2009 versus 786in February 2008, a 52 percent drop. Thisis largely a sign of the significant resaleinventory and commensurate dramatic dropin new home construction.Additionally, total home sales for the12 months ending this January were40,882 compared to the 37,361 duringthe 12 months ending February 2008, ahealthy rise of 9.4 percent. The burningoff of inventory is critical to the return ofprice stability, as long as we recognizethat not all closings are created equal. Inother words, purchases by investors andspeculators are not what are needed. Whatis needed are purchases by homebuyers,and that only will occur in any meaningfulway when the job market improves.Las Vegas ValleyAnchored Retail MarketThe valley’s anchored retail market is beingsignificantly challenged by a number offactors: The principal one being significantjob losses, which has led to plungingconsumer confidence and spending. Forexample, the nation’s aggregate savingsrate (as a percent of personal income) was.3 percent in February 2008. By comparison,this February’s rate was 4.2 percent. Clearly,consumers are conserving cash to rebuildsavings and retirement plans devastated bythe recession. Additionally, Clark Countyhas seen a sharp fall in taxable retailsales. Moribund consumer confidence andspending are the causes. That is why taxableretail sales in Clark County dropped to 2.3billion, or by 13.2 percent, in January 2009from 2.7 billion in January 2008.Retail Space and VacancyOur research shows the valley closed Q1,2009 with an anchored retail inventory ofmore than 42 million square feet in 258shopping centers. Of this amount, 3 millionsquare feet stood vacant, resulting in a
direct vacancy rate of 7.2 percent. Thisrepresents a more than doubling of the 3.4percent recorded for Q1, 2008.At the end of Q1, 2009, NeighborhoodCenters (usually anchored by supermarketsand providing convenience shopping forday-to-day needs) had the highest vacancy at7.9 percent and comprised 36 percent of thevalley’s total retail inventory (in square feet).Community Centers (generally anchoredby supermarkets and discount departmentstores selling apparel, home improvement,furnishings, toys, electronics or sportinggoods) followed with a 7.3 percent vacancy.This group accounted for 42 percent of thevalley’s anchored retail inventory. Finally,Power Centers (dominated by several largeanchors) had the lowest vacancy at 5.8percent and comprised 22 percent of theremaining inventory.with an additional 2 million square feet inplanned sp
With Cox Business VoiceManager, you have new options in managing your phone traffic. And, as the case with all our services, VoiceManager is maintained locally 24/7/365 with the award-recognized customer support you expect from Cox Business. Every time the phone rings, your employees are one step ahead.
