Downtown Las Vegas must have set a record for most persistent decay in the midst of plenty. The area has been in a 40-year slide, starting with the exodus of gamblers to the gleaming new hotels to the south, on The Strip. The city became the gambling capital of the world, taking in billions.
In the 1990s, the Strip was reborn with enormous new family-friendly resorts, bringing in even more money. Downtown was the place for seedy by-the-week rooms, divy bars and low-roller casinos. Even as Las Vegas became the fastest-growing metro area in the nation, bringing about 60,000 new residents a year, downtown remained part of the city's dissolute history — not its prosperous present.
That may be changing. The faded central business district, established when the railroads put the town on the map in the early 1900s, is finally catching up with the rest of Vegas. With backing from City Hall and an infusion of cash from developers, downtown is becoming a destination in its own right. Buyers are suddenly standing in line to purchase condos that won't be ready to move into for a year or more. And the buzz around downtown has got retail developers jockeying for position to serve this up-and-coming area.
“More projects are happening in downtown than on the Strip, because the city has a pro-growth council and mayor who wants to see a good vertical legacy when he's gone,” says Kenneth LeVesque, entitlement coordinator in charge of getting permit and preconstruction approval for locally based JMA Architectural Studios, which designed Summit Tower. The $700-million, 73-story tower will include 159 ultra-luxury condominiums atop 800 condo-hotel units and 25,000 square feet of restaurants and retail. “This is a good thing for downtown, but it is a struggle dealing with infrastructure,” he adds. “This is an older city with infrastructure that needs a lot of work.”
Most people credit the city's colorful mayor, Oscar Goodman, for the sea change in the downtown landscape. Goodman, a Democrat, who as a lawyer defended organized crime figures, was elected in 1999 and outlined a vision for “Manhattanizing” the city's core. He admits that downtown's revitalization was slow getting off the dime. “When I was elected six years ago, people were running away from downtown,” he says. “But I knew it was important to focus on downtown to sustain the vitality of the entire region. I waited for a year and a half; begged people to do something,” Goodman adds. “Everyone came at once. Now, every day somebody wants to show me a new project.”
It didn't just happen. Goodman has traveled the country to woo investors and has gained a reputation as a savvy cheerleader for his city. And at home, he's helped push through zoning changes that make it easier for developers to come in. Rundown neighborhoods have been recast as Arts, Entertainment and Cultural districts.
In the past year, the pieces fell into place. Not one major project was in the works in downtown Vegas a year ago. Today, 28 sites with about 8,000 residential units are rising or planned in the Las Vegas CBD. Most are high-rises, ranging in height from eight to 73 stories, with ground-floor retail of, on average, about 20,000 square feet, according to Julie Quisenberry, senior economic development officer for the city.
The aim is to create a lively 24/7 lifestyle for new downtown residents. The City of Las Vegas General Plan calls for ground-floor retail in 70 percent of downtown residential projects, points out Steve Van Gorp, director of the city's Office of Business Development. The idea is to make sure downtown is a cool place to walk around.
“It's a complete transformation from check cashers to restaurants, nightclubs, high-end shops and coffeehouses — all the commercial services a person could want if living in an urban condo,” says Quisenberry, a former broker. The city is currently negotiating with several national grocery operators for a downtown supermarket, which she notes is pivotal to the area's success as a community.
One key component is a plan to convert a 61-acre parcel, now occupied by an abandoned rail yard and rundown commercial buildings, into residential and retail properties. Union Park will include a total of 250,000 square feet of neighborhood retail, which the city is building in partnership with The Related Group. The project, which includes the city's Cultural District, will be developed in phases, according to Marty Berger, executive vice president for The Related Group, with two residential towers, a new city hall, a 350,000-square-foot performing arts center, a 300,000-square-foot office building, and Lou Ruvo Alzheimer's Center coming first, followed by a baseball stadium, academic medical center and more residential with ground-floor retail later.
Since the plan was announced in early 2004, developers have been pouring in with proposals. These neighborhoods are already seeing change, with galleries and other art-related businesses, restaurants, nightclubs and residential projects replacing mechanics shops, bug exterminators and other industrial facilities.
Several art galleries, design shops and home-design showrooms have opened in the Arts District, in the western part of the city, and projects like Holsum Lofts, formerly the Holsum Bread Co., are intended to provide live-work space for artists. Additionally, a couple of nightclubs and restaurants have opened in the Entertainment District, which is located east of Fremont Street. Barclays North, Inc., a Seattle-based residential developer, is building Streamline Tower on a site here. This project consists of 251 condominium units and 11,000 square feet of retail and entertainment space.
And, of course, it wouldn't be Vegas without some gambling. Barrick Gaming Corp. has paid $200 million for property near downtown and plans six casinos. Overall, Barrick intends to invest $1 billion downtown over the next decade.
As more projects are announced, more developers are showing interest, says Dean Jalili, senior investment advisor for Sperry Van Ness in Las Vegas. That, he says, includes international investors. “Because downtown is so rundown it's taken a little while to happen, but the outlook for the downtown market is very positive,” he says. “Developers want into this market, because of skyrocketing land prices and the city's commitment.”
Jalili is currently working with an Israeli developer to locate property here, and other international developers have already moved in, including Australians Victor Altomare and Joseph Di Mauro, who funded the Summit Tower project.
On the retail front, New Jersey-based Chelsea Property Group, which was acquired by Simon Property Group last year, got a leg up on the competition by opening the 435,000-square-foot Las Vegas Premium Outlets on South Central Grand Parkway in August 2003. The project offers merchandise from 110 upscale retailers. “It's a high-performing center; it's a great location, our shoppers are very happy, and that's what it's all about,” says Michele Rothstein, senior vice president of marketing for Chelsea.
Across the street from the outlet center, The Related Group is developing the World Furniture Market, a new 57-acre, 8-million-square-foot industry showroom and market facility at the gateway to downtown. Eleven of the 25 top U.S. furniture manufacturers have already signed up for space in the facility, including Ashley Furniture and Lane, says Berger, who notes that when completed, this will be the largest industry showroom and market facility in the nation.
The first of eight buildings will open in time for the facility's first industry show, which begins July 25. Although this building has 1.3 million square feet of space, Related is providing another 1.3 million square feet of showroom space in tents and at the convention center.
On the edge of the city, Altomare and Di Mauro are building Liberty Tower, an ultra-luxury residential project, with 7,000 square feet of ground-floor retail, on the edge of the city across the street from the historic Stratosphere hotel and casino. Nic Niccum, an architect with JMA Studios, says the owners are currently searching for an independent restaurant operator to create a unique sidewalk cafe, which has been given the working title “Freedom Cafe.” The concept is that cafe patrons could ask for anything they would like to eat and the chef will prepare it.
The sudden reversal of fortunes for downtown Las Vegas has a lot to do with Mayor Goodman, says local developer Sam Cherry, the first developer to build upscale condominiums in downtown. “In the beginning he didn't understand the process, but prodded everyone to get projects done. He pushed every button necessary to get a few developers to come to the table,” he adds. “The city's support was the catalyst for us.”
And, notes Keith Schwer, professor of economics and director of the Center for Business and Economic Research at the University of Nevada Las Vegas, persistence helped. “Things picked up because the city has been at it a long time,” he says.
In the end, however, Schwer says it's the market that made downtown's revitalization viable. The region's economy is experiencing phenomenal growth: Gaming was up 10 percent last year and new residents continue to pour in. Based on increases in state tax revenues, the Nevada economy grew by 9.7 percent in 2004, according to a report by a state Economic Forum, which predicts another 5.8 percent increase in growth this year. Additionally, the Las Vegas region is expected to add 60,000 new residents this year, which is pushing development near land's end and land prices up.
There is another factor, too. In 2003, voters approved a “Ring Around the Valley” anti-sprawl ballot initiative. The law limits how much public land the Bureau of Land Management can release to developers at its semiannual land auction, limiting the southward sprawl of the past decade. Consequently, land has become increasingly scarce and values are skyrocketing, so developers are now looking inward for space to build, Schwer suggests.
Cherry and the San Diego-based Tom Hon Group, an affordable housing developer, were the first two residential developers to go into the downtown market. In March, Tom Hon completed L' Octane, a 52-unit affordable family project targeted at city personnel and schoolteachers. However, Cherry's $61 million SoHo Lofts, a 15-story, 120-unit condominium project with 9,000 square feet of retail space, is what set off upscale residential development in downtown. “Before SoHo, there was no interest in downtown at all,” Cherry says. “Now, developers from all over the world are doing deals.”
DEMOGRAPHIC OVERVIEW
- Population (2003 estimate): 1.57 million
- Median household income: $44,616
- Unemployment rate ( Feb. 2005): 4.6 percent
MARKET OVERVIEW
- Average retail rent: $19.44 per square foot
- Average vacancy: 4.8 percent
- Construction: 1.4 million square feet
- Planned: 6.8 million square feet
Sources: Census Bureau, BLS, CB Richard Ellis