“Retail is showing the strongest market improvements compared to other commercial sectors,” writes Cushman & Wakefield in a second quarter report on the Las Vegas market. Marcus & Millichap relates recent improvement in the local market to increasing tourist traffic, itself an effect of “an improving national job market and healthier corporate balance sheets.” Indeed, this source cites a projection calling for a 4.5% increase in metro area retail sales this year. Convention traffic, meanwhile, was up 37% to date in 2012 as of mid-year.
For the 29.3 million square feet of community-neighborhood shopping center space tracked locally by Reis, these favorable factors have yet to translate into definite recovery trends, although they may now be emerging. Alongside no new supply, community-neighborhood shopping sector net absorption was cautiously positive through the first half of the year at 90,000 square feet, including the second quarter’s 38,000 square feet. Vacancy ended the quarter at 12.5%, down 10 basis points for the period, down 40 year-over-year yet still 170 above the second quarter national community-neighborhood sector rate. Rents continue to lose ground. At $20.97 psf and $17.87 psf, asking and effective averages were down 0.6% and 0.5% for the period and were down 1.5% and 1.4% year to date—on the heels of respective losses of 1.3% and 1.2% in 2011. July 2012 was not helpful: 51,000 square feet of negative net absorption eliminated a large portion of the year’s gain to-date; vacancy added 10 basis points and each rent type saw a 0.2% decline. All the same, July’s losses should soon be recovered. Reis’ late-September report on individual construction projects, meanwhile, expects no space of this type to complete construction this year.
The large-format sectors, meanwhile, seem better situated. Four such projects with a combined total of more than 1.0 million square feet were under construction per report date for delivery in 2013. The largest and first to deliver will be the 390,000-square-foot Decatur 215 power center at Highway 215 and north Decatur Boulevard in northwest Las Vegas, due on line next July. Also in northwest Las Vegas, 300,000 square feet of retail in the second phase of the Tivoli Village mixed-use project are scheduled for an October 2013 finish. In southeast Las Vegas, The Linq lifestyle center, at 200,000 square feet, is due on line next September preceded by the August delivery of 139,500 square feet of retail at the Skyvue Las Vegas Super Wheel mixed-use development. Of the 7.8 million square feet of retail space in the planned-proposed pipeline, 72.0% belong to power center, regional center or mixed-use developments. Reis put second quarter power center vacancy at 8.6%, down 60 basis points from a year earlier but 230 basis points above the national power center rate. The average asking lease rate for local non-anchor power center space was $28.97 psf, down 1.3% year-over-year.
On a worthy note, the development at the huge Summerlin master- planned community in northwest Las Vegas, derailed by the recession and the bankruptcy of its previous developer, is again warming up (see the Office Space section for information on office development getting underway at Summerlin). In September, department store retailer Macy’s announced plans for a 180,000-square-foot store at new developer Howard Hughes Corporation’s Shops at Summerlin, the first Macy’s to be built in Las Vegas since 1996, EquityBites reported in September. Plans call for an autumn 2013 start to be followed by completion in autumn 2014. A second Macy’s also has been announced: Fashion Show Mall on South Las Vegas Boulevard will host a 105,000-square-foot Macy’s Men’s Store in space previously occupied by Robinson’s-May. A spring 2013 opening is planned. A 201,000-square-foot full-line Macy’s, which will be remodeled, also takes space in the mall.
“Steady, but slow recovery through 2012,” is expected by Cushman & Wakefield for the local retail market overall. The same applies to the community-neighborhood shopping center sector tracked by Reis. Absorption should run positive over the remainder of the year and vacancy should slip to 12.3%. Losses in average rents will not be alleviated until 2013, however.