Real estate forecast mixed for LV

Class B office space, the middle-class workplace of the commercial real estate portfolio, is said to be overbuilt in Las Vegas.

"Buckle your seatbelt," said Tim Snow, newly appointed president of the Thomas & Mack Co. "1999 is going to be a bumpy road."

Snow expects local developers to market their offices creatively -- possibly with cut-rate lease deals -- to slice into the oversupply and he said there may even be some foreclosures in the year ahead.

Class B space is the workhorse of the office real estate category. It serves as home for back-office operations, such as call centers and processing facilities and for financial, insurance and real estate businesses.

Snow's company's McCarran Center, home of the Reno Air reservation center in Las Vegas, is one such building.

Snow said while there is about 380,000 square feet of Class A office space available in the city with a vacancy rate of about 9.6 percent and 350,000 square feet available in the low-end Class C market with a 10.4 percent vacancy rate, there's an inventory of 1.4 million square feet and a vacancy rate of 13.4 percent for Class B.

Snow's assessment of the office market was the gloomiest real estate forecast offered at Real Trends, a forum on the Las Vegas land market in four categories, sponsored Colliers International. Other speakers on retail, industrial property and residential trends at last week's half-day conference were generally upbeat.

Colliers' own assessment in the office sector is that vacancy rates have increased since the beginning of 1998 because of high construction activity, despite historic highs in net absorption, the rate at which space is occupied.

Retail expert Terri Powers, senior vice president of leasing and merchandising for TrizecHahn, said she expects the Las Vegas market to continue to flourish as developers focused on "experience retail" in which the environment is as important as the product.

Powers' company is attempting to put the concept to practice at its newest project, Desert Passage, a 462,000-square-foot center at the new Aladdin hotel-casino.

Other developers have disclosed their own plans and concepts and continue to raise the bar by redefining the retail experience, Powers said. The Forum Shops at Caesars is one standard-bearer while the Canal Shops at the Venetian hotel-casino promises to be another.

"If ever there was a place for experience retail," Powers said, "Las Vegas is the place."

About 150 shops and restaurants will comprise Desert Passage, which will wrap around the Aladdin Theater of the Performing Arts, a 2,600-room hotel and a London Clubs International gaming center.

One of the first food outlets announced for the project was Commander's Palace, an award-winning Creole restaurant. The Desert Passage project will be the first time Commander's Palace locates outside New Orleans.

Malls aren't the only retail outlets working to redefine their concepts. Powers gave credit to Barnes & Noble, Starbucks and American Girls for developing fresh concepts that create traffic in their stores. She also applauded Kmart for introducing Martha's World, which is exploiting the "fashion for the home" niche with products endorsed by Martha Stewart.

Real Trends' keynote speaker also had good news for retailers: The Internet and e-commerce aren't going to turn malls into ghost towns.

Vic Sussman, editor of washingtonpost.com's Talk Central and a trends-forecasting "cybervisionary," said despite the tremendous gains in popularity of the World Wide Web, there's no danger of computer commerce overtaking traditional shopping.

His reason: People need social contact and will continue to shop and work despite the benefits of on-line buying and telecommuting.

In the residential category, Robert Lewis, president of the combined operations of Lewis Home Management Corp. and Kaufman & Broad, predicted more of what made his company the undisputed market leader in Las Vegas -- consolidation and mergers.

Lewis sold 1,703 of the more than 20,000 single-family homes purchased by buyers in Southern Nevada in 1998. Now that Lewis Homes has merged with Kaufman & Broad, the company projects 2,700 sales in 1999, a year expected to fall short of '98's record pace.

Lewis expects low interest rates to keep buyers interested and the Las Vegas real estate dynamic to change as more Bureau of Land Management acreage becomes available.

"Builders will keep on building and will be slugging it out for market share," Lewis said.

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