Good fortune has not been on the Lady Luck’s side.
Before shutting it’s doors for renovations in 2006, Lady Luck had become a dilapidated, remnant reminder of what used to be in downtown Las Vegas. Mayor Oscar Goodman was not as kind with his words describing it as a rotting corpse, a blight, a disaster, and a carcass. That was all supposed to change with the renovations that were planned… then the recession hit.
Finally though, luck appears to be swinging back to the Lady’s side with new plans for a massive renovation being put in place by Resort Gaming Group (the same ones who helped arrange Zappos moving into the old City Hall).
The new renovation has been modified from the original plan. A restaurant/bar and sportsbook will replace the Celebrity Theatre on the corner of 3rd and Ogden. Sidebar will be enlarged slightly and converted into a wine bar. Triple George is staying and will undergo only “minor modifications” (which is great to hear- I highly recommend the restaurant).
The remainder of the Lady Luck itself will see meeting space, a rooftop pool over the casino, spa, fitness room, and a complete renovation of the remaining rooms.
Opening is slated for 2012, which should coincide with the Zappos move and the opening of the Mob Museum.
Las Vegas has ranked 2nd to last in a national index compiled by Marcus & Millichap… see the article here.
The Marcus & Millichap report projects an increase of .5%… a small increase, but the first in over 3 years. Vacancy rates are expected to fall to 9.1%- a drop by 80 basis points.
As would be expected, the area around UNLV is projected to be the most highly sought due to the student population and the opening of The Cosmopolitan nearby.
I personally see a great opportunity with multi-family housing. The recession has tarnished many individuals personal credit and stricter lending practices will keep many people in the rental market. As the economy begins to recover, rental rates can be more easily adjusted in multi-family than commercial leases. As a result, multi-family will reflect increased values more quickly.
The UNLV area could yield some lucrative investments… the opportunity to pick up assets in a high demand area coupled with the remote possibility of the UNLV arena project could provide a positive cash flow investment in the present with the upside potential for redevelopment down the road.
I also believe the downtown Las Vegas area is poised for growth and opportunity. With the relocation of Zappos to the soon to be vacated city hall there will certainly be an increase in demand for housing. What is particularly exciting about the Zappos move is that the employee culture of Zappos lends itself to people that would like to be a part of the downtown culture- youthful, creative, artistic, and just a little bit weird.
Shortly after the housing crash in 2008, there were many prophecies of an impending commercial real estate market crash. The good news is that doesn’t seem to have happened.
This article from Bloomberg goes discusses the state of the national commercial real estate market and where it is headed.
In my opinion, there are 3 core reasons this hasn’t happened:
1. A commercial crash would spell failure for nearly every major bank… the fact that they have so much skin in the game means they are much more willing to negotiate and work out solutions before turning to foreclosure.
2. The “tweaking” of accounting principles that has allowed lenders some flexibility in how they report the troubled assets that are on the books… this has allowed them to hold onto properties longer without being forced into a fire sale of distressed properties.
3. Interest rates remaining low have attracted buyers with the lower cost of capital and the opportunity for a larger upside potential.
The cities that seem to be poised for recovery consist of the usual suspects: New York, Washington, Boston. As the Bloomberg article discusses, in New York, cap rates are down to 5.5% versus a 6.2% national average for central business districts. This is pushing investors to begin looking for higher yields in markets such as Seattle, San Francisco bay area, and parts of Chicago and Atlanta.
The bad news for Las Vegas, and this shouldn’t be news for anyone, is that we still look to be a long way out from full on recovery.
Markets hit hard by the housing bust are struggling and are less likely to recover quickly, PriceWaterhouseCoopers LLP said in its annual Emerging Trends in Real Estate survey in October. Las Vegas, Milwaukee, St. Louis, Detroit and Cleveland are among the cities that scored the lowest in its poll of investors.
Las Vegas is a secondary market… we depend on tourism and gambling to bring the bulk of our revenue and until we have more people that are comfortable spending their money on leisure, we will continue to suffer.
The good news behind this is that the hotel sector does seem to be improving… as things continue to get better nationally, travel has started to resume:
The upswing is boosting hotel sales in the Americas, which are expected to jump as much as 25 percent this year, Jones Lang LaSalle’s hotel investment-services unit said on Jan. 4. As property values rise, lenders are reworking existing loans and making new ones, according to Christopher Jordan, head of hospitality banking at San Francisco-based Wells Fargo.
“Hotels represent a very attractive investment opportunity because they’ve seen such a sharp decline,” Jonathan Gray, senior managing director and co-head of real estate at New York- based Blackstone Group LP, said during a conference on Nov. 18. “We’ve been deploying a lot of capital in this area.”
Hotels have an advantage that other types of commercial real estate lack, said Morgans Hotel Group Co. President Marc Gordon. They can boost room rates quickly to take advantage of economic growth, while tenants at offices and retail properties tend to sign multiyear leases.
For the Las Vegas strip, this means we should be focusing on business and convention travelers. We need to be looking at ways to not only retain the conventions and shows that we have had in the past, but also be aggressively pursuing new opportunities. The more difficult fact we face is that, in the middle of a sharp decline in demand, we added over 7500 hotel rooms to the city. Soaking up the additional supply could mean a prolonged recovery, additional losses, or a combination of both.
The most important lesson we can garner from all of this as Las Vegans is that we must work to diversify our economy so that we are not relying on a single sector to bail us out. If we make it through to recovery without any significant changes, we have missed the opportunity and will be doomed to repeat history.
Craig Cavileer and Ed Roski (from Majestic Realty) unveiled an idea for a massive project for UNLV today that included a new stadium and an integrated village that would account for over 300 acres being redeveloped. As the plans stand right now, the village would consist of:
- The stadium, which could seat up to 40,000 and could be utilized for football and basketball games among other events
- 3,000+ units of on-campus housing
- 600,000 sq. ft. of retail space (restaurants to hotels to coffee shops)
- Parking for 15,000+
As a current UNLV student, I am excited at the prospect although I stand no chance of seeing it before I graduate. I have a great love for our city and the school, but I would be lying if I didn’t admit that we lack a “true” university atmosphere and experience. This would be a great boon to our school and would certainly help establish UNLV’s legitimacy as a college.
Now might be the time to start looking at some of the real estate around the area and what is available… if a project like this actually takes off, there is a huge upside potential for the area.
For more details, visit the Las Vegas- Review Journal links below:
Proposed UNLV Stadium
UNLV Stadium Proposal
I can’t take credit for all of these… many have been taken from discussions with friends and articles that I’ve come across in the past.
You know you’re from Las Vegas when…
1. All of your directions start with.. “Take the 95 to…” OR “Take the 15 to…”
2. The last time you went to the strip, your cousins were in town last summer
3. You know the seasons: Really hot, 2 weeks of nice, not so hot, 2 weeks of nice
4. When you go to different cities, you’re amazed things aren’t open after 9 pm
5. You think no slots at a 7-11 or a grocery store is not normal
6. You can get hard liquor any day of the week, any time of the day
7. You have no idea how a lottery works
8. WHAT THE HELL IS LAST CALL ANYWAY?!?!?!
9. You know the spaghetti bowl has nothing to do with food
10. You think a pile of rocks is a nice lawn
11. You remember the ugly lion
12. You need to walk through a casino to see a movie
13. You laugh at people taking pictures in front of the “welcome” sign
14. You remember when the “welcome” sign used to be the edge of town
15. You remember when the 215 was a secret
16. You can wear pants in the summer and shorts in the winter
17. You can say 115 degrees without fainting
18. You have never seen a snow shovel/ice scraper and don’t know anyone who owns one
19. You have learned that in July and August it only takes 2 fingers to drive a car
20. You have discovered that you can get a sunburn through your car window
21. You know that the best parking spaces are determined by shade, not by distance
22. You are comfortable at 102 degrees
23. Half of your neighbors are from California and the other half are from New York
24. They all moved to Nevada to avoid oppressive taxes, but now demand the same services that they had at home
25. You can say “but it’s a dry heat” without laughing
26. The water in your pool has been too hot to swim in and you don’t even have a heater
27. Your power bill in the summer is more than your mortgage payment
28. You have ever golfed when it was 117 degrees outside
29. You’ve golfed in December in a short sleeved shirt
30. You know Autumn has arrived when the temperature finally dips to 95 degrees
31. You’ve tried to work on your car in the summer and burned your hand picking up a wrench that was left in the sun less than two minutes ago
32. Before people come to visit from out of town they can’t get the concept that you don’t live in a casino
33. You think it’s perfectly normal that roads that should be parallel somehow intersect
34. You’ve been grocery shopping at 3am in the morning
35. You get happy when it’s overcast and ecstatic when it rains
Exciting news to see Zappos going downtown and taking over the old City Hall… I think this is the kick that was needed to really spur the redevelopment and excitement for our old downtown area. There has been a really great core group of people that have been incredibly committed to really changing the area, but it has never seemed able to hit that “critical mass” to really take off.
Zappos moving offices to old city hall in downtown Las Vegas
