The fortunes of Las Vegas’ commercial real estate industry have taken a turn for the better.
Sales of commercial properties valued at $10 million or more in Las Vegas jumped 16% in the first half of 2010 compared with the same period last year, according to New York-based research firm Real Capital Analytics (RCA) in a new report. Across the five commercial property sectors, sales totaled $158 million.
However, the number of deals shrank by 36% in the first half of 2010 compared with the same period of 2009, to a total of seven. That indicates that individual sales are larger by dollar volume — a healthy sign, according to RCA.
The largest share of the spending so far this year occurred in the retail sector, where investors spent $105 million in two deals. Investors also spent $18 million for industrial properties, in a single deal. Meanwhile, three multifamily sales in Las Vegas totaled $11 million in the first half.
Although Las Vegas is known for its flashy hotels, the RCA report recorded no deals involving at least $10 million.
The trend in Las Vegas mirrors the fledgling recovery underway in other cities, and not just in the U.S. but in international markets as well. In the first half of 2010, global sales of major properties valued at $10 million or more rose an impressive 75% over the same period in 2009, to reach $231 billion.
The further the global economy moves from the recent recession, the stronger the commercial real estate recovery will be, says Dan Fasulo, managing director at RCA. “The first half of 2009 is going to wind up being the low point with regard to transactions.”
Barring another nationwide or global economic slowdown, the commercial real estate market and other financial markets are expected to continue on a path to recovery, says Fasulo. The number of transactions is expected to rise in 2011 and 2012, he adds.
A report by New York-based researcher Reis, meanwhile, shows that commercial real estate fundamentals in Las Vegas remain weak. For instance, the vacancy rate for community and neighborhood shopping centers in the second quarter stood at 12.7%, down slightly from 12.9% in the first quarter, but considerably higher than the 11.8% vacancy recorded in the second quarter of 2009.
Both retail figures seem downright anemic, however, when compared with the 6.2% vacancy rate in the second quarter of 2008, when the Las Vegas economy was relatively robust.
In the second quarter, effective rents for community and neighborhood shopping centers declined to $18.65 from $18.97 in the first quarter.
On a year over year basis, the decline in effective retail rents was steeper. In the second quarter of 2009, the average effective rent for community and neighborhood shopping centers was $19.86.
In the apartment sector, the vacancy rate registered 11.1% in the second quarter, an improvement over the first quarter’s 11.8%. However, those 2010 rates were still higher than in the second quarter of 2009, when the apartment vacancy rate in Las Vegas was 10.1%.