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1ST QTR
RETAIL MARKET
REPORT 2010LAS VEGAS, NV
1ST QTR
RETAIL MARKET
REPORT 2010
Commerce Real Estate Solutions • 3800 How...
1st QTR Retail Market Report Commerce | Las Vegas, NV
www.comre.com2010
Our Vision
We are the firm of choice - a real esta...
1st QTR Retail Market Report Commerce | Las Vegas, NV
www.comre.com2010
Our Vision
We are the firm of choice - a real esta...
1st QTR Retail Market Report Commerce | Las Vegas, NV
www.comre.com2010
Our Vision
We are the firm of choice - a real esta...
1st QTR Retail Market Report Commerce | Las Vegas, NV
www.comre.com2010
Our Vision
We are the firm of choice - a real esta...
1st QTR Retail Market Report Commerce | Las Vegas, NV
www.comre.com2010
Our Vision
We are the firm of choice - a real esta...
1st QTR Retail Market Report Commerce | Las Vegas, NV
www.comre.com2010
Our Vision
We are the firm of choice - a real esta...
1st QTR Retail Market Report Commerce | Las Vegas, NV
www.comre.com2010
Our Vision
We are the firm of choice - a real esta...
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Commerce Retail 1st qtr_2010

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Transcript of "Commerce Retail 1st qtr_2010"

  1. 1. 1ST QTR RETAIL MARKET REPORT 2010LAS VEGAS, NV 1ST QTR RETAIL MARKET REPORT 2010 Commerce Real Estate Solutions • 3800 Howard Hughes Pkwy, Suite 1200 • Las Vegas, NV 89169
  2. 2. 1st QTR Retail Market Report Commerce | Las Vegas, NV www.comre.com2010 Our Vision We are the firm of choice - a real estate advisor and principal - the global standard for knowledge, service, and execution. National and State Employment and Unemployment Overview National unemployment rates reached a 28 year high at 10.4%, roughly 11 million unemployed workers that are now drawing unemployment insurance benefits. In February alone, 27 states recorded unemployment rate increases. The highest regional jobless rates were in the Western part of the country, while the Northeast recorded the lowest rates. Michigan again recorded the highest unemployment rate among the states, 14.1 percent in February. The states with the next highest rates were Nevada, 13.2 percent; Rhode Island, 12.7 percent; California and South Carolina, 12.5 percent each; and Florida, 12.2 percent. The Las Vegas economy continues to be impacted by downturns and high employment rate, currently 13.9%, in all major sectors, including gaming, construction, financial and real estate. The recession will most likely be a “jobless recovery.” Since World War II there have been a total of 11 recessions and in the most recent recessions before the 2007 recession, job growth lagged long after the recession. In fact it took several years for the unemployment rate to return back to prerecession levels. Employment growth is critical to future economic growth and the return to a healthy commercial market which may take several years to accomplish. At A Glance Vacancy Rates Reached New Highs Overall vacancy rates reached another high during the quarter at 13.64%. This is a 0.62% jump from 4th quarter 2009 and a 6.24% raise from a year ago. Anchorless Strip product type is showing the highest vacancy rates at 21.15%. Vacancy increases during the year were impacted by several store closings due to the current economic conditions. Rents Fall Again As Landlords are faced with a “Tenant” market, they are seeing many retailers renegotiating for lower rents and asking for more concessions as their leases come up for renewal. Negotiations like these and more up-front incentives help stabilize and even lower the overall average lease rates. Currently, the Las Vegas market is showing annual averages lease rates at $1.74 per square foot (psf). This is a drop from last quarter at $1.85 psf and higher of a drop from a year ago when rates where at $2.15 psf. Challenging Outlook for Las Vegas Continues Looking forward, the retail sector is expected to continue to face challenges posed by a troubled employment market, low consumer confidence levels and a still struggling housing market. Vacancy rates are expected to continue upward into the foreseeable future. The task of identifying tenants who have a need for space in some of the larger units and filling more than 7.4 million square feet of available product will be difficult in the next year. Retail Market Indicators Current 1Q10 Change Since 1Q09 Vacancy 13.64% Lease Rates (NNN) $1.74 NNN Net Absorption* (446,568) Construction N/A *The arrows are trend indicators over the specified time period and do not represent a positive or negative value. (e.g., absorption could be negative, but still represent a positive trend over a specified period.) -1% 1% 3% 5% 7% 9% 11% 13% 15% 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 Las Ne US Un -1% 1% 3% 5% 7% 9% 11% 13% 15% 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 Las Vegas – 13.9% Nevada – 13.2% US – 9.7% Unemployment rates 1Q10
  3. 3. 1st QTR Retail Market Report Commerce | Las Vegas, NV www.comre.com2010 Our Vision We are the firm of choice - a real estate advisor and principal - the global standard for knowlege, service, and execution. Las Vegas Market Overview As we start the New Year, the big question on everyone’s minds is what is going to happen next and will the signs of recovery start to show and what will it look like for the Las VegasMarket.Expertsaroundthenationbelievethatrecovery will start to show by early 2011 and in some areas may have already hit rock bottom. UNLV Economics Department Chairman, Dr. Stephen Miller says “improvements in taxable sales, gaming revenue and McCarran Airport passenger counts are good indicators of an improving economy (for the LasVegasmarket).”Millergoesontostatethat“alotofthings are happening locally that are suggestions that the economy is trying to reach bottom and turn around.” While Southern Nevada’s local economy may be starting to see the bottom of the commercial recession period, some experts are still analyzing declining property values, maturing commercial loans, ownership vs. leasing, the benefit of receiverships and the local business activity. According to Kenneth P. Riggs, President and CEO of RERC, “The past decade has served up some tough lessons about acting on our gut instincts and about what makes sense and what simply does not fit with sustainable practices. But for investors seeking to seize market opportunities, 2010 is time to gear up for a possible once-in-a-lifetime opportunity to snag key long-term investments in commercial real estate.” In 2010, with leasing activity lagging, we are seeing more landlords willing to hang “For Lease” and “For Sale” signs on their buildings. John Kulper, president of Commercial Alliance of Realtors, wrote “While lenders generally are avoiding investment real estate, owner-occupied commercial real estate is beginning to look attractive again.” Real Capital Analytics also agrees stating that “owner-occupied purchase now represent almost 10% of global transactions and will be involved in a greater share of property deals.” In a recent study, most commercial brokerage firm’s executives believe that “real estate prices now make it more financially advantageous to buy rather than lease.” In the Las Vegas market, commercial property values and asking rates continued to fall this quarter which may help with the decision to either buy or lease. The Federal Government is also monitoring the weakness of the commercial real estate market. The Feds believe that the weakness of commercial loans is a very serous problem becausethewholeeconomycouldbehit,muchlikethehousing bust has caused. Troubled commercial real estate loans could be the primary force behind bank failures this year. Elizabeth Warren, chair of the TARP Congressional Oversight panel stated that “around half of all commercial mortgages will be underwater by the end of 2010, posing a very serious problem for the economy over the next three years.” The Las Vegas Retail Market Vacancy By end of the quarter, vacancies reached new highs with approximately 7.48 million square feet of vacant product coming online. This equates to a 13.64% vacancy factor. Above-average vacancies were noted in the North Las Vegas (19.74%), Central East (14.70%), and Henderson (27.31%) submarkets. By product type, Strip Center (21.15%) and Neighborhood Center (14.37%) retail buildings posted the highest vacancies at the end of the quarter as discretionary spending pulled back, further impacting the viability of small business owners. Summerlin at 7.24% and Central West at 8.93% posted the lowest vacancy rates. The retailers that are pulling through the recession have enjoyed the current vacancy and the old time saying “location, location, location” really means something right now to the retailers that can make the move to more premier locations as rental rates are lowered and become more affordable.
  4. 4. 1st QTR Retail Market Report Commerce | Las Vegas, NV www.comre.com2010 Our Vision We are the firm of choice - a real estate advisor and principal - the global standard for knowlege, service, and execution. Retail: Quarterly Vacancy 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% Q 106 Q 206 Q 306 Q 406 Q 107 Q 207 Q 307 Q 407 Q 108 Q 208 Q 308 Q 408 Q 109 Q 209 Q 309 Q 409 Q 110 Retail Space Vacancy Rates Central West, 8.93% East, 15.74% Henderson, 27.31% Nellis, 10.71% North Las Vegas, 19.74% Northwest, 12.57% Southwest, 13.45% Summerlin, 7.24% Central East, 14.70% Green Valley, 12.96% Retail Vacancy by Type Anchorless Strip, 21.15% Community Centers, 12.23% Neighborhood Centers, 14.37% Freestanding, 2.37% Retail: Inventory (SF) and Vacancy Rate (%) 30,000,000 35,000,000 40,000,000 45,000,000 50,000,000 55,000,000 60,000,000 Q 106 Q 206 Q 306 Q 406 Q 107 Q 207 Q 307 Q 407 Q 108 Q 208 Q 308 Q 408 Q 109 Q 209 Q 309 Q 409 Q 110 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% Retail: Vacancy (%) and Ave. Lease Rates $2.03 $1.92 $1.94 $1.82 $1.54$1.67 $1.49 $1.99 $1.33 $1.64 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% CentralEast CentralW est East G reen ValleyHenderson Nellis North Las Vegas NorthwestSouthwestSum m erlin $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 Retail: Quarterly Absorption (SF) (4,000,000) (3,000,000) (2,000,000) (1,000,000) - 1,000,000 2,000,000 Q 106 Q 206 Q 306 Q 406 Q 107 Q 207 Q 307 Q 407 Q 108 Q 208 Q 308 Q 408 Q 109 Q 209 Q 309 Q 409 Q 110 Retail Space Vacancy Rates Central West, 8.93% East, 15.74% Henderson, 27.31% Nellis, 10.71% North Las Vegas, 19.74% Northwest, 12.57% Southwest, 13.45% Summerlin, 7.24% Central East, 14.70% Green Valley, 12.96% Retail Vacancy by Type Anchorless Strip, 21.15% Community Centers, 12.23% Neighborhood Centers, 14.37% Freestanding, 2.37%
  5. 5. 1st QTR Retail Market Report Commerce | Las Vegas, NV www.comre.com2010 Our Vision We are the firm of choice - a real estate advisor and principal - the global standard for knowlege, service, and execution. Retail: Quarterly Vacancy 0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% Q 106 Q 206 Q 306 Q 406 Q 107 Q 207 Q 307 Q 407 Q 108 Q 208 Q 308 Q 408 Q 109 Q 209 Q 309 Q 409 Q 110 Pricing (Average Asking Rent) Weak consumer spending and troubled employment continues to force many businesses to close and the demand for retail space is shrinking. This activity has lowered the average asking rents around the valley. Average asking rents witnessed another decline to $1.74 per sf/mo NNN during 1st quarter 2010, which was slightly below the $1.82 per sf/mo NNN reported in the preceding quarter (Q4 2009) and further below the $2.15 per sf/mo NNN reported one year ago. The amount of product available at year-end represented an all- time high, which will likely contribute to continue softening in retail prices. New Supply (Completions) and Market Demands Developers have halted many projects resulting in no new construction completions during first quarter. With the continued hesitation of developers to build product, due to scarce construction financing and weak rents, we also don’t expect much of the planned product to come online any time soon. Future new supply levels will continue to shrink as market corrections are underway. It may take another five years for the housing market to become stable, credit to start flowing and employment to become active again before any rise in construction numbers. For a smart recovery, the retail market needs to solve the imbalance of supply and demand by allowing existing vacant space to be absorbed and wait out this business cycle before any major growth should happen. Outlook In the coming months we expect commercial real estate prices to decline further and not see any true recovery until the end of the year to early next year. The market will continue to be impacted by cautious consumer and company activity, causing vacancies to remain elevated and most likely continue to increase. Rents will also continue to be impacted by the currenteconomyandwillcontinuetofall. Inareportproduced by UNLV’s CBER, “Southern Nevada business will continue to struggle with the after effects of the deepest recession in the US since the Great Depression. To date, Southern Nevada has not enjoyed the same level of increase in business activity as the rest of the US.” The local economy will not pick up until we see robust growth in hiring and according to the survey, with only 10% of businesses anticipated to hire more workers, the recovery will be very slow for the Las Vegas area. We are optimistic going into 2010 that the bottom is near and compared to last year, vacancy is not rising and lease rates are not falling as fast or as far as we were witnessing. Looking forward, incremental job growth is anticipated to be limited, with nearly every sector pointing toward continued contraction in 2010. Income and spending levels are also likely to remain depressed, as consumers pull pack in the face of uncertainty. These conditions will force retailers to shift their business models back to the pre-boom era, a change that can be difficult to achieve. That said, opportunities for those seeking expansion or entrance into the Las Vegas market over the next several years should be attractive from a pricing perspective. Las Vegas Retail Overview 2005-2010 YTD 7.40% 3.90% 13.64% 4.31% 3.71% 13.02% 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 9,000,000 2005 2006 2007 2008 2009 2010 $1.75 $1.92 $2.04 $2.15 $1.85 $1.74 44.50 48.73 50.06 50.40 55.88 54.91 Year Ave Lease Rate Base * Sf Millions SquareFeet 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% Vacancy Built Vacant Inventory Vacancy
  6. 6. 1st QTR Retail Market Report Commerce | Las Vegas, NV www.comre.com2010 Our Vision We are the firm of choice - a real estate advisor and principal - the global standard for knowlege, service, and execution. Rules for Market Review Only existing properties, for lease >=20,000 square feet are included in the market reviews TYPE REGIONAL MALL ................................................ENCLOSED MALL REGIONAL CENTER.............................................>= 350,000 SF COMMUNITY CENTER ........................................>= 100,000 AND <= 349,999 SF NEIGHBORHOOD CENTER ................................>= 50,000 AND <= 99,999 SF ANCHORLESS STRIP ............................................<=49,999 SF FREESTANDING ...................................................FREESTANDING Las Vegas Retail Submarket Map
  7. 7. 1st QTR Retail Market Report Commerce | Las Vegas, NV www.comre.com2010 Our Vision We are the firm of choice - a real estate advisor and principal - the global standard for knowlege, service, and execution. No. of Existing Under Const. Planned Net Gross New Bldgs. SF SF SF SF Rate Absorption Spaced Supply Low High Avg. Central East Community Centers 20 3,341,495 - - 458,228 13.71% 59,805 74,032 - $0.75 $3.00 $1.55 Freestanding 6 232,766 - - - 0.00% 24,000 24,000 - Neighborhood Centers 6 492,815 - - 99,232 20.14% 16,790 16,790 - $0.90 $4.00 $1.97 Anchorless Strip 39 1,478,030 - - 257,827 17.44% (92,724) 5,435 - $0.50 $3.00 $1.39 Total 71 5,545,106 - - 815,287 14.70% 7,871 120,257 - $0.50 $4.00 $1.64 Central West Community Centers 29 4,980,163 - - 367,701 7.38% 230,338 253,243 - $0.50 $3.23 $1.32 Freestanding 6 512,437 - - 1,200 0.23% 2,400 2,400 - $1.00 $1.60 $1.46 Neighborhood Centers 17 1,300,033 - - 123,508 9.50% 55,680 86,382 - $0.60 $2.50 $1.44 Anchorless Strip 41 1,458,720 - - 244,262 16.74% (46,465) 24,061 - $0.31 $2.50 $1.11 Total 93 8,251,353 - - 736,671 8.93% 241,953 366,086 - $0.31 $3.23 $1.33 East Community Centers 16 2,532,242 - - 419,042 16.55% (94,219) 28,888 - $0.49 $4.50 $1.52 Freestanding 2 77,234 - - - 0.00% - - - Neighborhood Centers 2 181,777 - - - 0.00% 1,080 1,080 - Anchorless Strip 12 402,940 - - 83,685 20.77% 9,104 13,854 - $0.50 $2.50 $1.45 Total 32 3,194,193 - - 502,727 15.74% (84,035) 43,822 - $0.49 $4.50 $1.49 Green Valley Community Centers 32 6,907,293 - - 747,258 10.82% (210,177) 120,965 - $0.50 $4.00 $2.09 Freestanding 3 263,856 - - 26,974 10.22% 9,181 36,155 - $0.83 $0.83 $0.83 Neighborhood Centers 22 2,055,795 - - 320,891 15.61% 5,281 57,996 - $1.00 $7.50 $2.14 Anchorless Strip 24 779,738 - - 202,075 25.92% (3,344) 21,057 - $0.50 $3.00 $1.61 Total 81 10,006,682 - - 1,297,198 12.96% (199,059) 236,173 - $0.50 $7.50 $1.67 Henderson Community Centers 10 1,954,454 - - 584,491 29.91% (295,176) 54,054 - $0.75 $4.00 $1.88 Freestanding - - - - - - - - Neighborhood Centers 3 295,539 - - 9,818 3.32% (2,418) - - $1.75 $2.25 $2.10 Anchorless Strip 7 347,623 - - 115,171 33.13% (45,919) 6,481 - $0.50 $3.50 $1.98 Total 20 2,597,616 - - 709,480 27.31% (343,513) 60,535 - $0.50 $4.00 $1.99 Nellis Community Centers 8 1,235,823 - - 89,731 7.26% (15,129) 2,899 - $0.85 $2.55 $1.38 Freestanding 2 100,340 - - - 0.00% - - - Neighborhood Centers 11 908,002 - - 133,960 14.75% 30,295 42,796 - $0.90 $3.25 $1.73 Anchorless Strip 16 528,204 - - 73,260 13.87% (28,586) 419 - $0.70 $3.50 $1.52 Total 37 2,772,369 - - 296,951 10.71% (13,420) 46,114 - $0.70 $3.50 $1.54 North Las Vegas Community Centers 24 4,817,384 - - 784,308 16.28% (75,613) 15,356 - $0.50 $3.75 $2.11 Freestanding - - - - - - - - Neighborhood Centers 16 1,444,702 - - 376,229 26.04% (47,562) 6,787 - $0.75 $4.00 $1.77 Anchorless Strip 12 423,059 - - 159,036 37.59% (14,898) 32,924 - $0.49 $3.50 $1.59 Total 52 6,685,145 - - 1,319,573 19.74% (138,073) 55,067 - $0.49 $4.00 $1.82 Northwest Community Centers 17 3,451,348 - - 324,305 9.40% (41,925) 8,849 - $0.81 $3.25 $1.97 Freestanding - - - - - - - - Neighborhood Centers 11 721,010 - - 133,846 18.56% 90,682 93,592 - $0.99 $4.00 $2.08 Anchorless Strip 13 366,302 - - 112,531 30.72% (2,173) 3,930 - $0.75 $3.25 $1.76 Total 41 4,538,660 - - 570,682 12.57% 46,584 106,371 - $0.75 $4.00 $1.94 Southwest Community Centers 15 4,176,004 - - 548,099 13.12% (59,358) 45,544 - $1.00 $4.00 $2.04 Freestanding - - - - - - - - Neighborhood Centers 10 962,756 - - 50,222 5.22% 81,709 98,855 - $1.25 $2.80 $1.90 Anchorless Strip 44 1,630,125 - - 311,822 19.13% 84,681 133,613 - $0.75 $5.00 $1.83 Total 69 6,768,885 - - 910,143 13.45% 107,032 278,012 - $0.75 $5.00 $1.92 Summerlin Community Centers 18 3,602,518 - - 201,332 5.59% (63,772) 22,048 - $0.75 $3.50 $2.36 Freestanding - - - - - 0.00% - - - Neighborhood Centers 8 515,641 - - 28,498 5.53% 251 2,400 - $0.85 $3.00 $1.83 Anchorless Strip 13 428,398 - - 99,179 23.15% (8,387) - - $1.00 $3.75 $1.90 Total 39 4,546,557 - - 329,009 7.24% (71,908) 24,448 - $0.75 $3.75 $2.03 Las Vegas Total Community Centers 189 36,998,724 - - 4,524,495 12.23% (565,226) 625,878 - $0.49 $4.50 $1.82 Freestanding 19 1,186,633 - - 28,174 2.37% 35,581 62,555 - $0.83 $1.60 $1.15 Neighborhood Centers 106 8,878,070 - - 1,276,204 14.37% 231,788 406,678 - $0.60 $7.50 $1.88 Anchorless Strip 221 7,843,139 - - 1,658,848 21.15% (148,711) 241,774 - $0.31 $5.00 $1.61 Total 535 54,906,566 - - 7,487,721 13.64% (446,568) 1,336,885 - $0.31 $7.50 $1.74 Commerce CRG Las Vegas Retail Market Report Q1 2010 Vacancy Asking Rent (NNN) Inventory Vacancy Demand & Supply Pricing
  8. 8. 1st QTR Retail Market Report Commerce | Las Vegas, NV www.comre.com2010 Our Vision We are the firm of choice - a real estate advisor and principal - the global standard for knowlege, service, and execution. Commerce | full service commercial real estate solutions Commerce Real Estate Solutions has been among the top commercial real estate brokerage firms in the Intermountain West for over 30 years. From our headquarters in Salt Lake City and offices in Provo/Orem, Clearfield and St. George, Utah, Las Vegas, Nevada and Seattle and Bellevue Washington we offer a full range of brokerage services, valuation and consulting, client representation and property/facility management. Our alliance with Cushman & Wakefield extends our reach worldwide. Meeting your real estate objectives is our number one goal at Commerce Real Estate Solutions. Whether you’re looking to lease, own, develop or sell commercial properties, we have the team of professionals to get it done for you. Our seasoned agents are recognized both regionally and nationally for their first-rate performance; and because of their success, they tend to stay with our company longer. The average tenure of Commerce agents is one of the longest in the industry. That means you’re getting an experienced agent when you do business with us. You’re also gaining access to our Information Services Group, which includes our Geographic Information System (GIS), the industry standard-bearer in mapping, Graphic Design and Marketing, and Research. At Commerce we have a complete understanding of the real estate market. Our comprehensive database allows our agents to feel, track and analyze every movement in the industry and to see opportunities as soon as they arise. Combine this with the global resources of Cushman & Wakefield and you get the most innovative and progressive real estate brokerage in the Intermountain West: Commerce Real Estate Solutions. Doing business in a brisk and nuanced marketplace is complex and difficult. We can help. Our experience, knowledge,innovativethinking,networkinginfrastructure and unmatched service make Commerce the clear choice for your commercial real estate needs. Cushman & Wakefield Cushman & Wakefield is the world’s largest privately- held commercial real estate services firm. Cushman & Wakefield is the world’s largest privately-held commercial real estate services firm. Founded in 1917, it has 231 offices in 58 countries and 15,000 employees. The firm represents a diverse customer base ranging from small businesses to Fortune 500 companies. It offers a complete range of services within four primary disciplines: Transaction Services, including tenant and landlord representation in office, industrial and retail real estate; Capital Markets, including property sales, investment management, valuation services, investment banking, debt and equity financing; Client Solutions, including integrated real estate strategies for large corporations and property owners, and Consulting Services, including business and real estate consulting. A recognized leader in global real estate research, the firm publishes a broad array of proprietary reports available on its online Knowledge Center at www.cushmanwakefield.com.

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