Real Estate and Development

Las Vegas growth and location will lure plants

By Brian Wargo / Staff Writer

By its strong population growth and central location near expanding Southwest markets, Nevada is positioning itself to become the home of large food and bottling plants and other manufacturers, according to Alan Schlottmann, a UNLV economics professor.

Appearing at a panel discussion on Las Vegas fall commercial real estate trends, Schlottmann told a group of brokers, investors, developers and others in the industry that the population projections through 2030 are shaping up well for Las Vegas.

Nevada's population is projected to grow 114 percent through 2030. That's followed by 109 percent in Arizona, 56 percent in Utah, and 37 percent in California. The U.S. population is expected to grow 29 percent through 2030, he said.

That substantial growth of states east of California bodes well for Nevada because manufacturers prefer to be centrally located, he said.

"There will be a large incentive in the future for companies to locate in Clark County than Southern California if those firms not only want to service Southern California but Clark County and Arizona," Schlottmann said.

The event sponsored by Colliers International and Restrepo Consulting Group featured other panelists who weighed in about trends not only in the commercial industry but in the residential sector as well.

Principal John Restrepo released a survey conducted by McDonald-Carano-Wilson on how Southern Nevada's commercial real estate industry perceives the health of the market today and over the next year.

Among the findings:

• 86 percent were optimistic about the economy and market and only 1 percent expressed pessimism.

• 62 percent said they have expansion plans for their company and only 2 percent said they would contract.

• 60 percent said they expected commercial rents to appreciate 3 percent to 6 percent in 2007. The biggest concern was over industrial rents with 86 percent expecting them to increase.

• 26 percent said their net profit before taxes would be 20 percent or greater while 49 percent said profits would range between 10 percent and 19 percent.

• 38 percent said sales and marketing are the best way to improve profits, followed by pricing adjustments at 25 percent.

• 68 percent said the available land to support their operations is limited but 64 percent said they expect land prices to stay the same or decrease in the next year.

During the seminar, Restrepo said the slowdown in the housing markets provides a good opportunity for local governments to revisit zoning changes from industrial and other commercial to residential use. More commercial land is needed to maintain job growth and keep Las Vegas competitive with Utah, Arizona and New Mexico when it comes to land, he said.

The demand for commercial land will remain strong and projects that have been on the backburner because of their cost may now be feasible, Restrepo said.

With land prices no longer shooting upward, there may be a window over the next 12 months for more affordable projects as well, he said.

Michael DeLew, a senior vice president of the industrial division of Colliers, said he expects rents in the office, industrial and retail sector to increase 3 percent to 5 percent in 2007.

The 2007 rents would follow a steep rise in 2006 of between 20 to 30 percent in the commercial sector, DeLew said.

As for the housing sector, DeLew said that a slowdown is evident by builders pulling out of land deals, leaving millions of dollars on the table. He said observers expect builders to get interested in land again in nine to 18 months. Why should builders carry the interest on the land when they can get it in a year or longer at the same price and maybe lower? he asked.

Larry Murphy of SalesTraq and Steve Bottfeld, who monitor housing trends in the Las Vegas Valley, handed out their latest predictions at their quarterly Crystal Ball seminar.

Murphy discounts predictions of others and maintains no housing bubble exists in Las Vegas. He points to the median price of existing homes remaining steady. The $285,000 price in October is $1,000 higher than September 2005.

Bottfeld and Murphy used the presentation to debunk what they said are myths about the Las Vegas housing industry.

One of those myths is that there is no affordable housing, Bottfeld said. He said 1,800 homes listed for sale are priced at $200,000 or less, which he said falls in the affordable category.

Bottfeld criticized national media publications for its portrayal of the Las Vegas housing industry as having falling prices and resembling a ghost town. He said there's nothing wrong with having so many homes vacant.

"Investors are testing to market to see if they will get their price, and if not, they will rent it," Bottfeld said.

Bottfeld said he doesn't believe the increasing number of homes entering foreclosure signifies a problem. He said a change in laws that makes it more difficult to declare bankruptcy is the likely reason for more foreclosures.

Bottfeld predicted the housing market will be ready for another boom by the end of 2007.

"We have the same conditions that formed before the previous boom," Bottfeld said.

In other news in the real estate and development industry:

• Pardee Homes of Nevada paid $25.5 million for 3,605 acres in Coyote Springs.

• EJM Development won a TOBY Award in the category "Outstanding Building of the Year" in the industrial office park category handed out by the Building Owners and Managers Association. It honored Building 14 at the Arrowhead Commerce Center in southeastern Las Vegas, 6180 S. Pearl St.

• Burnham Real Estate, which provides commercial real estate services, announced its expanding its Las Vegas office through a partnership with RL Moore & Associates, a boutique commercial real estate firm.

• Crisci Custom Builders announced it has won a Best of 2006 award from Southwest Contractor magazine for its work on Metro Police's crime scene investigation forensics laboratory.

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