Las Vegas has the distinction of having one of the worst housing markets in the country. But now that slump, along with job losses and high fuel prices, is infecting Sin City’s commercial real estate market, sending vacancies in all sectors sky high.
The city’s commercial sectors clocked the second-worst increase in vacancies in the past year, according to Marcus & Millichap Real Estate Investment Services, following only Orange County, Calif., where the main problem is too many empty offices.
“The first domino for commercial real estate was the loss of construction jobs. The second domino was the effect of job losses, foreclosures and lost home equity on the local economy. And the third domino was the national economic slowdown,” said Hessam Nadji, managing director of Marcus & Millichap.
Through May, Las Vegas had lost 5,000 jobs, “a significant turnabout” from only three years ago when 56,000 jobs were created, Nadji said. The housing environment is the main culprit. One in every 99 Las Vegas households received a foreclosure filing in June, RealtyTrac Inc. said Thursday.
Foreclosures aren’t just a homeowner’s problem. Dave Dworkin, a research analyst at Grubb & Ellis Co., said foreclosures on small industrial properties are on the rise in Las Vegas.
Meanwhile, office vacancies are also edging higher as mortgage brokerages, interior designers and other residential real estate firms retrench. Office vacancies hover above 15 percent, compared with the national average of just over 13 percent, according to CB Richard Ellis Inc., not including the subleased space coming back online.
Mom-and-pop retailers are also putting their plans on the back burner, said Nelson Tresslar, senior vice president at Grubb & Ellis. Many depended on home equity to fund new leases for startups or expansions, but that source of capital has dried up.
Pile on the number of retailers closing weak stores or going broke and you can see why the vacancy rate in Las Vegas has doubled to 6 percent from a year ago, said Kit Graski, a senior vice president at Voit.
“It’s quite a dramatic increase,” Graski said, adding that major retailers are asking for lower rates on existing leases. And landlords, who were in denial last year, are doing what they can to keep tenants happy.
