Las Vegas on the Rise: A Real Estate Boom in the Desert

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Exploring the Drivers Behind Southern Nevada's Explosive Growth and Opportunities

Posted: August 01, 2024 by Coldwell Banker

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Las Vegas has long been known as a high-growth region with a population now approaching 2.4 million.[1] This growth is reshaping the real estate development industry in numerous ways. Beyond the leisure and hospitality sector, Las Vegas is rising in prominence as a regional economic engine, hosting important businesses from logistics to medicine and data centers. By 2040, CBER forecasts the area’s population to reach nearly 3 million.[2] Along with that growth, the rapid expansion in real estate development will need to continue in a big way.

 

But what is driving that growth? It’s predicated on multiple factors, but a key feature of Southern Nevada is its proximity to one of the largest economies in the world, California. Although an economic powerhouse, California’s tax regime and regulatory apparatus constantly drive companies outwards. California is ranked 48^th for State Business Tax Climate, while Nevada is seventh.[3] However, California’s geographic advantages imply that its importance will remain (with significant business siphoned off by other states), given the agricultural produce and the state’s ports. Las Vegas is advantaged by this connection and the I-15 serves as a main artery for the path of goods between California and Montana.  Nothing exemplifies this more than the recent surge in industrial development. Tilt-up warehouses dominate along portions of the I-15 and 215, where logistics needs reflect the modern, ecommerce-driven retail business. Manufacturing is also growing where sector employment is up six percent year-over-year.

 

While $790 million in new and renovated hotel development is anticipated for 2024, a famously tracked industry, a less obvious impact to the region is the 12.4 million square feet of industrial development happening now.[4] Las Vegas ranks 13^th in the under construction industrial space. Although less than half of the leader, Phoenix, at over 31 million square feet, this represents a massive 6.7% increase in inventory, alleviating a multi-year supply restriction from demand supercharged during the pandemic.

 

For the office market, Las Vegas counters the high-vacancy headlines in cities like San Francisco. Instead, Las Vegas remains below historical highs, measuring 10.9%, compared to San Francisco at 22.3% or Los Angeles' 16.2%. While some submarkets struggle with outdated spaces, Class A projects and small divisibility offices near neighborhoods attract tenants. Currently, 785,000 square feet are under construction, which could accommodate nearly 3,200 employees. Notable projects include Civic Plaza in Downtown Las Vegas, additional UnCommons space, and the newly built Meridian in Summerlin. High-profile firms moving to the region often require prominent Class A spaces and these projects accommodate those users.

 

Returning to factors for growth, lifestyle is a top consideration for movers and the Las Vegas area is bountiful for both urban and suburban living options, with residents taking advantage of natural spaces and designed worlds, such as the new Sphere and some of the other $8 billion of entertainment options delivered just last year. A trip to the Strip can be a fantastic diversion, yet retail and restaurants in the neighborhoods are a key consideration. With all the residential growth over the past few years, retail has often not kept pace. With strong unmet demand there has been a shortage of retail space in some submarkets, like the Northwest and Southwest. Developers are trying to fill these gaps. Origin at Symphony Park is incorporating retail, including grocery, into a cohesive mixed-use community. The Bend, a large Southwest retail project nears opening, while CNR Retail and Partners Capital are working to repurpose office space in Green Valley for retail use. These are large scale projects, however single-tenant retail and neighborhood retail development are also required in some areas; however, construction and financing costs have often delayed this production, though rent growth is likely to solve some of these issues. Placer.AI finds that newcomers to Las Vegas have higher household incomes than current residents.[5] This suggests more liquidity for investment and leisure spending, a likely tailwind for retail. The internet may have propelled industrial to new heights, but it certainly wasn’t at the expense of retail real estate in Las Vegas.

 

With 1.48 persons moving to Las Vegas for every one person moving out, Las Vegas needs to expand medical services and while not always at the pace we would like to see, developers and healthcare operators are growing.[6] Union Village continues to expand, and West Henderson Hospital is nearly complete. In North Las Vegas, Helios, a project with medical office and retail is currently performing land and utility preparation. The Village at St. Rose, a mixed-use project, has both delivering and planned office, much of it for medical. These projects will improve healthcare access and options for residents in several Valley areas and Las Vegas is in the spotlight for specialized healthcare.[7] Further expansion in this sector will ensure potential residents that all their requirements are accommodated locally.

 

With the Tropicana filing for demolition, we are reminded again of Las Vegas’ constant change. What other city embraces renewal and growth than Las Vegas? Additional sports franchises, infrastructure projects and entertainment complexes are just on the horizon. In 2025, we anticipate an excess of $1 billion in hotel property construction completions, while other announced projects could be upwards of $27 billion.[8] We suspect this figure will grow substantially based on projects seeking land entitlements now. Of announced projects, many will have regional impacts, supporting Las Vegas’ growing role as a conduit for business and as an entertainment destination. Brightline West, Oak View Group, Fertitta Entertainment, Red Rock Resorts and Howard Hughes all have significant plans in the works and the momentum of the region appears to favor them.

 

With all these projects underway, it seems quite obvious that Las Vegas’ (Southern Nevada’s) future remains VERY POSITIVE! And with the anticipation of the Fed loosening monetary policies soon…well…that could cause RED HOT to become WHITE HOT!

The only real question is…WHAT are YOU going to do to ensure your “UNFAIR SHARE” of the real estate opportunities tied to ALL THIS DEVELOPMENT?

MAKE IT HAPPEN!!