REAL ESTATE: Las Vegas may be missing key aspects to attracting investors

Las Vegas should be among the U.S. cities primed for renewed investor interest in commercial real estate, but a new report from a national trade group shows the city may be missing some of the attributes it needs to compete for dollars.

The research arm of NAIOP, the Commercial Real Estate Development Association, released a Feb. 10 report pointing to secondary, or smaller, markets as the wave of the investment future. That’s because high-quality real estate properties in primary markets — mostly big, coastal cities such as Los Angeles, New York, Chicago, Miami, Seattle and Washington, D.C. — have pretty much recovered the property values they lost in the downturn. That means fewer bargains for investors looking to add value and reap big returns relatively quickly.

So investors are looking toward secondary markets, which include Las Vegas, Salt Lake City, Phoenix, Baltimore, Cleveland and Pittsburgh. But interest won’t spread evenly to all markets: The NAIOP study says money will favor secondary markets with “a high concentration of skilled workers and a track record of innovation.” What’s more, the report adds a caveat about economies dominated by a single industry.

Those investor preferences could be problematic for Las Vegas. Start with a skilled labor force: Clark County doesn’t really have one. Among county residents 25 and older, 22.2 percent have at least a bachelor’s degree, compared with 28.5 percent nationally, according to numbers from the U.S. Census Bureau.

And although the city’s tourism operators have a track record of innovation in the hospitality industry, the sector almost single-handedly dominates the economy. A March report from local research firm Applied Analysis showed that the tourism sector directly supported 223,200 local workers, or 28 percent of the region’s labor force, in 2012. What’s more, the total economic impact of Southern Nevada’s tourism sector in 2012 was $44.9 billion, or 48 percent of the region’s gross product. The industry also generated 41 cents of every dollar paid in local wages and salaries.

“Concentration in one industry implies volatility, with greater upside offset by a deeper downside,” the NAIOP study said.

Whether secondary markets can draw investment activity will depend as well on the availability of financing, the report said. Investors should also keep in mind that although investment returns will grow as recovery progresses, secondary cities are likelier to see faster declines in sales activity following a market peak.

Some secondary markets also may struggle to offer enough high-profile inventory for institutional investors in particular. In that regard, it’s important to note that some of Southern Nevada’s biggest commercial assets are off the market. A subsidiary of investment firm Blackstone bought The HC | Hughes Center — the crown jewel of the local Class A office market — for nearly $350 million in September. And in 2012, Houston investor Hines partnered with Oaktree of Los Angeles to buy General Growth Properties’ 1.1 million-square-foot Summerlin office portfolio.

Still, because recovery in secondary markets has lagged revival in major markets, there are opportunities for informed investors who time their buys right, the report said.

■ A local electrical contractor earned a national award from a building trade group.

Helix Electric grabbed top honors in its category at the Feb. 11 Excellence in Construction Awards, held by Associated Builders and Contractors in Hawaii.

Helix won in the category that covered electrical-commercial projects worth $2 million to $10 million. The trade group recognized Helix for a $6.4 million contract it completed to deliver new switch gear, lighting and communications systems at the Sands Expo and Convention Center. Helix finished the project while the center was open for business, working behind temporary walls with zero recordable accidents.

“It’s an honor to be able to recognize this company for their impressive achievements in key areas of project planning, execution and delivery,” said Dan Brodbeck, national chairman of Associated Builders and Contractors. “Their commitment to innovation and quality on each job makes them the best the merit shop has to offer.”

■ Sun Commercial Real Estate wrapped up a major building deal on Feb. 4.

Brokers Cathy Jones, Paul Miachika, Jessica Beall and Roy Fritz represented CPI TWO LLC in its $4.5 million sale of a 46,691-square-foot industrial property at 6425 Montessouri St. Dan Doherty, SIOR, of Colliers International represented buyer Roberts Ranch Venture LP.

Sun Commercial brokers also closed on several leases in January.

C. Roger Jeffries III represented landlord Juliet Office Building LLC in a 72-month lease for 1,854 square feet at 8375 W. Flamingo Road to Real Property Management LLC. Anh (Bui) Jung represented tenant Gecko Wraps Signs and Graphics in its 39-month lease with landlord Oakcrest Trust for 5,590 square feet at 6455 Dean Martin Drive. And Jones, Miachika, Beall and Fritz represented landlord Rancho Palomino LLC in its 24-month lease of 2,250 square feet of space at 630 Rancho Drive to tenant PW Inc. The leases were worth about $300,000 combined.

■ Robin Civish and Lauren Brouillet of Voit Real Estate Services represented landlord Parcel E LLC in its lease of 5,000 square feet at 2650 Sunridge Heights Parkway to tenant JD Sullivan Inc. for the development of a childcare center. Wes Drown of RE/MAX Commercial represented the tenant in the $389,000 deal.

■ Greg Pancirov, SIOR, of Colliers International represented tenant FirstService Residential Nevada LLC in its lease of 3,893 square feet at 8861 W. Sahara Ave. Andrew Kilduff, also of Colliers, represented the landlord, Winner Properties LLC, in the $236,000 agreement.

Contact reporter Jennifer Robison at jrobison@reviewjournal.com. Follow @J_Robison1 on Twitter.