Retail market still thriving

Despite higher construction and land costs, retail development in Las Vegas continued to flourish in the fourth quarter with 5.8 million square feet under construction, CB Richard Ellis brokerage firm reported.

And 15 million square feet in planning gives a glimpse into the future of the retail market, CB managing director Craig Shute said.

Retail vacancy in Las Vegas remains among the lowest in the nation at 4.76 percent, he said.

"Typically, retail follows rooftops and that's where you see it growing, on the fringes," Shute said. "But in time, you will see gentrification and older properties being redesigned and repositioned."

While both developers and retails have increased the number of planned retail projects in Las Vegas, they have struggled to bring new retail online fast enough to meet the demand of Southern Nevada's population boom over the past two decades, Shute said.

Las Vegas added 2.1 million square feet of retail space to the market in the fourth quarter, a majority of it in the Town Square mixed-use development on Las Vegas Boulevard South at Sunset Road.

Plise Cos. started work on City Crossing, a $2 billion, 126-acre mixed-use project that will include 1 million square feet of retail near the Henderson Executive Airport.

Mixed-use projects continue to be an important focus of developers as they strive to best use the increasingly expensive land, Shute said.

Other notable retail projects in their early construction stages include the 1.4 million-square-foot Summerlin Center and the 700,000-square-foot The Village at Queensridge, bringing the mixed-use element to the master-planned Summerlin area.

Still in planning are the Great Mall of Las Vegas, which would bring 1 million square feet of retail to the northwest submarket, and The District at Desert Star, which would add 1.2 million square feet to North Las Vegas.

Triple Five Nevada plans to begin construction on the Great Mall of Las Vegas in the fall and has changed the design to an open-air, lifestyle center with two residential condominium towers. The Great Mall will have 185 stores and 12 restaurants.

"People today prefer the outdoor environment instead of having to drive from venue to venue," said James Grindstaff, Triple Five's vice president of planning and development.

Economists are pointing to a slowdown in consumer spending this year, which is a valid concern, CB's Shute said. However, it hasn't slowed retail development in Las Vegas.

"A lot of national retailers still want to grow, and Las Vegas is one of the markets in the nation that still has positive population growth," he said. "And with the amount of investment on the Strip and what people are projecting for 2009, a lot of retailers want to commit now to projects."

Monthly asking rents for retail space averaged $2.17 a square foot, not accounting for operating expenses, John Restrepo of Restrepo Consulting Group reported. That's up from $1.66 a square foot in fourth quarter of 2006.

Anchored retail centers that came online in 2007 had much of their space preleased, reflecting the ongoing demand for retail services and products by the valley's rapidly growing population, Restrepo said.

"We expect that as the new retail projects in the pipeline are completed, they will be quickly absorbed," he said. "However, the X-factor is, where is consumer confidence heading?"

Applied Analysis showed fourth-quarter retail vacancy at 3.2 percent on an inventory of 48.7 million square feet. Net absorption, or the amount of space taken, was around 1.5 million square feet, with 2.4 million square feet under construction.

"Consumer spending remains an area of concern for retailers and related commercial markets," Applied Analysis principal Jeremy Aguero said.

Not only have current economic conditions had an impact on retailers from a sales perspective, Aguero said, but financial institutions are keeping a watchful eye on their performances and will likely require more stringent covenants while limiting expansion plans.

Contact reporter Hubble Smith at hsmith@reviewjournal.com or (702) 383-0491.