Property Market In Las Vegas Hits Losing Streak

Source : The Business Times, July 8, 2008

Vacancy rates for apartments, offices up in Q2

(NEW YORK) As Las Vegas sees its hotel and casino businesses sputter and office, apartment and retail real estate markets flag, the rest of the country is hoping what happens in Vegas stays in Vegas.

Despite its crushing housing market, one of the worst in the nation, Las Vegas' economy has been held up on the shoulders of tourists ready to imbibe giant drinks, shop, see shows, and, of course, gamble.

But there are growing signs that the higher cost of gas, food and airline travel is trumping the gold and glitter.

'The tourist economy of Las Vegas can't just rely on its own or nearby surrounding areas,' said Sam Chandan, chief economist of real estate research firm Reis. 'People really have to come in from outside.'

So far in 2008, overall visitation to Las Vegas is down from last year.

Nevada casinos won just over US$1 billion from gamblers in April, the latest figures available, a 5.1 per cent decrease from the same month a year earlier, according to Nevada's Gaming Control Board.

The major casino operators all reported lower profits or outright losses for the first quarter, and there are few indications that conditions are improving.

Last week UBS cut its share price target on Las Vegas casino owners Las Vegas Sands Corp, Wynn Resorts Ltd and MGM Mirage.

In the second quarter, the office vacancy rate in Las Vegas rose to 17.3 per cent, up 3.2 percentage points, the greatest jump among the 79 office market Reis tracks.

The apartment vacancy rate in the quarter rose to 7 per cent, up 0.5 percentage point, according to Reis. The Las Vegas apartment market was the third worst performer among major US markets. In comparison, the average overall US apartment vacancy rate was stable at 5.9 per cent.

Vacancies at the city's strip malls crept up 0.3 percentage point to 5.6 per cent. Strip mall rents fell 0.2 per cent, making the market No 44 out of 79 in terms of rent growth.

'In spite of having a strong demographic trend in terms of population growth, it does rely on tourism dollars,' Mr Chandan said. -- Reuters