Retail expands, demand slows

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Doug Calvin sees potential in Las Vegas for Steve & Barry’s to open several apparel stores and "share the love" with both tourists and residents.

Calvin, director of real estate for the New York-based retailer, is looking at places along the Strip, in major hotels and in surrounding residential neighborhoods to open new stores.

The timing is right, he said, given the residential growth of Las Vegas coupled with Steve & Barry’s nationwide expansion initiative. He’s in discussions with several resorts and will be meeting with retail developers during the upcoming International Council of Shopping Centers show in Las Vegas.

"There’s clearly a gravity there with the hotels and obviously tourism," Calvin said. "We’re sort of a destination because of our price points. Fifteen dollars is very affordable for America."

Breaking into the Las Vegas market won’t be easy with retail vacancy at 2.5 percent in the first quarter and a general slowdown in consumer spending, said Jeremy Aguero, principal of Applied Analysis, a Las Vegas financial research firm.

While longer-run expansions appear inevitable, the next two quarters are likely to reflect a continued slowdown in retail demand, he said.

"Visitor volume growth is modest, under 1 percent, and population growth is slowing, so we have fewer consumers and existing consumers are spending less money," Aguero said. "A lot of people were refinancing and taking money out of their homes from 2003 to 2005 and now we see the opposite effect with the cannibalizing of disposable income."

Las Vegas retail expanded by 1.8 million square feet in the first quarter to 46.2 million square feet of total inventory with another 4.8 million square feet under construction, Applied Analysis reported. Average monthly asking rent is $2.08 a square foot, up from $1.75 in the year-ago quarter.

Future supply includes several regional retail outlets and mixed-use centers that will likely see plans evolve over time, Aguero said.

First-quarter completions were highlighted by a Wal-Mart Supercenter in North Las Vegas, a neighborhood center anchored by Albertsons at Warm Springs Road and Rainbow Boulevard, Cheyenne Pointe in North Las Vegas and Silverado Plaza in Henderson.

Consumer spending patterns are showing signs of a slowdown, Aguero noted. Taxable retail sales activity has declined on a per-capita basis as aggregate spending has been unable to keep pace with the rate of population growth and inflation, he said.

Researcher Jessica Willett of the CB Richard Ellis brokerage is not as concerned about the health of the retail market in Las Vegas.

"Low unemployment rates and a solid job growth forecast, together with population growth, will continue to underscore the demand for new retail development throughout the valley," Willett said.

CB reports 4 percent first-quarter retail vacancy for 49.5 million square feet of inventory. Net absorption, or the amount of space taken, was 731,515 square feet, about 61 percent of it in the southwest valley.

More than 7.8 million square feet is under construction. Major projects expected to come to the market this year include the Town Square "lifestyle entertainment center" on Las Vegas Boulevard and Montecito Town Center in northwest Las Vegas.

Another 12.2 million square feet is in the planning stages, CB reported. That includes a 1.3 million-square-foot retail center in North Las Vegas with expected development cost of $300 million, the Great Mall of Las Vegas planned by Triple Five Development in the northwest and General Growth’s Summerlin Center that will be anchored by Nordstrom.

Las Vegas is ranked No. 13 in the 2007 National Retail Index compiled by Marcus & Millichap, up six places from last year.

Job growth in metropolitan Las Vegas is helping drive demand in the local retail market, the brokerage said in its national report. Investors remain attracted to Las Vegas retail assets in 2007.

"We expect the steady stream of out-of-state capital to continue as investors seek alternatives to higher-priced West Coast markets," the report said. "Local retail property owners will remain hesitant to sell this year as cash flows continue to improve."

Asking rents are expected to grow 4.2 percent this year to $23.26 a square foot on an annualized basis, while effective rents gain 4 percent to $21.02 a square foot.

Retail construction activity is forecast to slow to 1.7 million square feet this year, compared to 2.1 million square feet in 2006. Vacancy is projected to increase 30 basis points to 4.5 percent.