This month, we look at the latest growth figures for retail development, employment, and the economic competitiveness, as reported by the Marcus & Millichap Retail Research Market Report and the Las Vegas Global Economic Alliance annual survey.
Starting with the latest Marcus & Millichap Retail Research Market Report, retailers absorbed more than 1.3 million square feet of space for the second straight year, trimming vacancy 110 basis points to 7.9 percent over the past year. The Downtown Las Vegas submarket, which has seen a robust demand compared to the available inventory, posted the lowest vacancy in the metro area at 3.5 percent. It is expected that robust absorption will continue through the end of 2018 and metro vacancy rates to drop to 7.5 percent.
The average retail asking rent declined 0.1 percent to $17.52 per square foot over the past 12 months, primarily driven by steep discounting on the west side of Las Vegas and Henderson in order to fill older vacant spaces. However, excellent performance was recorded in South Las Vegas, where the average asking rent surged 10.1 percent to $19.82 per square foot. Experts predict that the average asking rents will see a 4.7 percent increase to $17.80 per square foot by the end of 2018.
With such low inventory, it is no surprise that construction is up. Last year, builders completed 410,000 square feet of retail space, mostly in the Southwest Las Vegas submarket. At this time there are a projected 715,000 square feet of additional retail space that will be completed in 2018. However, due to the increase in residential construction around the fringes of the metro area, particularly neighborhoods to the south and northwest, most of this new construction, such as Skye Canyon Marketplace, is focused on multi-tenant centers anchored by grocery stores and free-standing restaurants.
One of the positive signs of an improved economy is the increase in out-of-state capital that is seeking local assets at higher cap rates than can be found in their home markets. In some instances, the spread can surpass 300 basis points. Investors, in the $1 to $10 million price range are dominating the transactions of Multi-tenant centers with cap rates in the high 6 to low-7 percent range. The Southeast Las Vegas and Henderson submarkets are drawing the majority of investor capital.
While the price per square foot for multi-tenant retail, in the mid-$220 range, dropped a little over the past year, single-tenant property saw a slight increase and is now in the low $440 range.
Also, an encouraging sign of continuing economic growth is the 2.5 percent increase in total employment. Over the past year, Las Vegas firms added 24,300 workers and expanded total payrolls by 2.5 percent. The construction, education, and healthcare sectors led to job creation, accounting for nearly half of all new positions.
Over the next five years, the Las Vegas metro area is expected to see a population increase of 287,300 at an annual growth rate of 2.5 percent, greatly surpassing the annual growth rate for the U.S. at 0.7 percent. Likewise, the metro area is projected to see 2018 job growth at 1.8 percent (the U.S. average is 1.2 percent), retail sales at 22.8 percent (the U.S. average is 19.7 percent), and five-year household growth at 118,000 or an annual growth rate of 2.7 percent (U.S. annual growth is 1.1 percent).
While the solid numbers from Marcus & Millichap paint a pretty good picture of the economy in Southern Nevada, the big question is how do business owners feel?
To answer that question, we look to the Las Vegas Global Economic Alliance and the just released 2018 Las Vegas Perspective Community Survey.
Responses to this survey were gathered from 500 Southern Nevadan’s, excluding retirees, students, and other unemployed workers, using four separate online surveys during the months of February and March.
When asked about the economic competitiveness of Southern Nevada, only 13.4 percent were negative stating that they thought the current economy is “somewhat worse” or “much worse.” On the positive side, 38.8 percent thinks that the economy is “somewhat better” and 12.0 percent feel that it is “much better.” Another 35.8 percent think that our economy is “about the same.”
Overall, 63.3 percent rate Nevada’s economy as “good” and 10.4 percent rate it as “excellent.” On the negative side, 14.0 percent rate the economy as “bad,” 4.0 percent think it is “terrible” and 8.4 percent are “not sure.”
Feelings about where the economy will be one year from now were about the same with 15.6 percent thinking that it will be “much better”, 34.8 percent saying that it will be “somewhat better”, 35.0 percent predicting it to be “about the same”, and 14.6 percent think that it will be “somewhat worse” or “much worse” than this year.
When it comes to hiring new employees, government regulations, the lack of qualified applicants, and pay scale are the major obstacles facing Southern Nevada businesses. While 33.0 percent are not finding any obstacles to hiring new employees, 29.9 percent are finding it difficult to hire at the current wage level, and 22.2 percent have difficulty finding qualified employees. Government rules make hiring new workers too difficult for 9.5 percent of the businesses, and 5.3 percent of the businesses list “other” nonspecific obstacles.
When asked about increasing the minimum wage, 70.7 percent are in support of the idea, 10.1 percent are not sure, and 19.2 percent are opposed. However, when asked about a specific minimum wage raise from $8.25 an hour to $15 an hour, only 48.0 percent said yes, 12.2% were not sure, and 39.8 percent said no.
As for outside influences on the local economy, the question was asked: “What impact has the current presidential administration had on your business?” Just under half, 43.7 percent answered “no impact at all,” with 19.4 percent reporting a “somewhat negative impact” and 8.2 percent feeling a “very negative impact.” On the positive side, 16.6 percent are seeing a “somewhat positive impact” and 12.2 percent have seen a “very positive impact.
And finally, a fun fact from the survey came from the question that asked people to “Rate your level of agreement with the following: I feel more pride in Las Vegas because of professional sports.” The result of that survey question found that 45.6% “agree” or “strongly agree,” professional sports have “no impact” to 38.2 percent of those participants, and 9.2 percent “disagree.” However, keep in mind that the question was asked back in February and March of 2018, before the first playoff game of the Las Vegas Knights hockey team. Now that the team is, against all the odds, in the playoff for the Stanley Cup, I wonder how those numbers might have changed.
Facts and figures like those presented above are great indicators of the current market and can help business owners make key decisions on whether the time is right to hire new employees, take on another business line, or expand locations. However, many of those decisions may be tempered by the lack of available cash. Financing growth is what Business Finance Corporation is all about. We can help turn accounts receivables into ready cash for whatever the need might be. If you have questions about factoring your accounts receivables, call Dave Cabral or Albert DelGado at 702-947-3800.
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