Las Vegas usually strikes visitors as larger-than-life, in many ways outlandish, and even surreal. It's a place that keeps outdoing itself. Why else would 38 million tourists and conference-goers descend on this baking desert plain every year? [??] The most recent U.S. census pegs Las Vegas (population 1.8 million) as the "fastest-growing major metropolitan area" in the country. Others call what is occurring there the "Manhattanization of Las Vegas," and with land prices as high as $8 million an acre that doesn't sound unreasonable. [??] When Las Vegas-based MGM Mirage announced a $5 billion casino/ hotel/condo and retail/dining/ entertainment project in September--which it says is the largest single real estate development in U.S. history--it was no mirage. Especially not coming from a company with net revenues of $4.2 billion in 2004. [??] Several weeks earlier, the $3 billion Las Ramblas project, much the same kind of scheme but writ smaller (and with Hollywood actor George Clooney on board) was announced. It will be developed by Related Las Vegas, a branch of The Related Companies LP, New York, which built the Time Warner Center in New York, and local developer Centra Properties LLC, Las Vegas.
But there is more--a lot more, much of it commercial development. A report released in November 2005 by Boston-based Colliers International Property Consultants Inc. and Las Vegas-based Restrepo Consulting Group LLC indicated that in the Las Vegas valley since the first quarter of 2001:
* 8 million square feet of office space has been added, a 33 percent increase over the intervening four and a half years, bringing its current inventory to 30 million square feet.
* The industrial market expanded by 25 percent, to 87 million square feet.
* The retail sector grew by 10 million square feet, or 46 percent, to 35 million square feet.
The "valley" is basically Clark County, dominated by Las Vegas, where most of the development is unfolding, and a few other communities. The wave of new commercial space is the outcome of nearly 100,000 new residents arriving every year, according to municipal records, along with a demonstrably strong economy.
It takes two telephone books a year to keep with up all the new residents and businesses. (Clark County planners received three applications for mixed-use developments in 2003, up to 40 last year, and more were expected by the end of 2005.) There are also so many communities in the planning pipeline or in progress on the city's periphery that builders are hard-pressed to invent new street names.
What kinds of people are flocking to Las Vegas? Marie-Josee Lafontaine, a principal of Scollard Group International (SGI), Toronto, a residential research and marketing firm with clients in several southern and Midwestern cities, describes them as "opportunists, investors, entrepreneurs, dreamers, second-home buyers, the affluent and the retired ... seeking their fortune, a less-expensive place to live and a better quality of life."
Commercial space thrives in that environment, but there can also be too much of a good thing. John Restrepo, a principal of the firm involved in the Colliers/Restrepo research, notes that commercial rents should jump by 10 percent or more over the next two years to make up for relatively flat rental rates over the past four years in a tenants' market.
Higher rents should also help to recover some of the obscenely high land prices developers are paying--an average of $601,600 an acre this year, 88 percent higher than 2004, according to Applied Analysis, a local economic research firm.
Guy Asher, senior...