Everywhere you look in Nevada, large commercial buildings are rising up to change skylines and city maps. In previous years, Las Vegas and Reno seemed to have a lock on large projects, but due to the scarcity and high price of land, development is now creeping outward into Lyon, Douglas and Storey counties, and even Elko County reports increased commercial activity. High land prices have also encouraged developers to look at infill projects in downtown areas, such as the Holsum Lofts project in Las Vegas and several hotel-to-condo conversions in Reno.
Some of the largest projects in Nevada involve its principal industry, as resort giants build, remodel and add to their properties. Wynn Las Vegas, scheduled to open next month, cost nearly $1 billion to construct; the 45-story structure built by Marnell Corrao will add 2,700 rooms to Las Vegas’ inventory. Las Vegas Sands Corp. is building the $1.6 billion Palazzo tower for the Venetian. Expected to open in 2007, the 50-story tower will have 3,025 rooms. Perini is the general contractor for two ongoing projects, the $200 million Augustus Tower addition to Caesars Palace, and Station Casino’s newest project, the $550 million Red Rock Casino Resort and Spa.
But things are booming outside the resort industry as well. Another huge project shows that economic diversification is becoming a reality in Southern Nevada. Phase I of The World Market Center in downtown Las Vegas is a 10-story, 1.3 million-square-foot building that will contain more than 200 showrooms for wholesale furniture vendors when it opens this summer. Future phases will bring the project’s total square footage to 7.5 million.
Let’s take a look at how some large commercial projects illustrate trends that are changing the market in Nevada.
Keeping Up with Growth: Healthcare Projects
Owners of healthcare companies are building being new facilities in both Southern and Northern Nevada to accommodate the 7,000 new residents moving here every month. In Southern Nevada, St. Rose Dominican Hospitals is constructing the 110-bed San Martin campus in southwest Las Vegas, due for completion in summer 2006. United Health Services has planned a 280-bed hospital in northwest Las Vegas, and most existing hospitals are involved in, or planning, expansions.
In Northern Nevada, Saint Mary’s Health Network opened a seven-story parking garage in October connected to Saint Mary’s Hospital Medical Center, and work is underway on a six-story outpatient facility scheduled to open in June 2005. The first three floors will contain a fitness center offering a “continuum of care” from lap pools and exercise equipment to therapy options for recovering cardiac patients. The top three floors of the $36 million project will contain a Women’s Health Center, imaging and radiology services, rehabilitation facilities and physicians’ offices.
The $85 million Carson Tahoe Regional Medical Center is slated to open this fall in the Carson City area, replacing the Carson-Tahoe hospital with a facility more than twice its size, in an effort to keep up with demands from the rapidly growing population in the surrounding area.
Washoe Health System is adding 500,000 square feet to the main campus of Washoe Medical Center, including a 10-story Patient Care Tower and a five-story parking garage. The tower will add 264 private hospital rooms, 72 intensive-care beds and expanded patient care areas, including emergency care and more surgical capacity. The $240 million project is slated for completion in mid-2007. General contracting for the facility is a joint venture between Sellen Construction and Clark & Sullivan Constructors.
Northern Nevada Medical Center in Sparks will start work this year on a three-story professional office building connected to the hospital. The medical center will add 48,000 square feet to the medical campus.
New Directions for Retail
Retail developers, following the maxim “retail follows rooftops” have been chasing rooftops all over the state with neighborhood centers, auto malls and lifestyle
centers. Terri Sturm of Territory Inc. said her company currently owns and operates over 2 million square feet of retail in Southern Nevada. Some of the biggest retail centers follow freeways and the I-215 Beltway, from the Eastern Beltway center in Green Valley to Centennial Center in the far northwest. Grocery-anchored neighborhood centers, such as Southern Highlands Marketplace in the Southern Highlands master-planned community, provide services to people living in new residential developments. Although following residential growth patterns seems to be paying off, Sturm reported her company is also investigating infill projects, either redeveloping centers in older neighborhoods or building on lots that were left vacant as development leapfrogged out into the edges of town.
According to Jeffrey A. Bayer, president of Alabama-based Bayer Properties, Incorporated, the Reno area has now grown enough to support a lifestyle center, and the real estate developer has begun preliminary sitework and infrastructure improvements for the Summit Sierra open-air retail center, which be the largest in the region.The $100 million Summit Sierra is on-track for a Spring 2006 opening of phase I, which will feature 70 shops and restaurants, including Century Theatres, Dillard’s, Williams-Sonoma, Pottery Barn, Coldwater Creek, J.Jill and Chico’s. The Summit Sierra is located at the intersection of I-395 and the Mt. Rose Highway, an area with many new housing starts and upscale developments.
But growth is not the only trend driving the retail market. There is also a national move toward adding more value and excitement to the shopping experience by combining stores with entertainment venues and restaurants. Town Square Las Vegas is being developed by CENTRA Properties and Turnberry Associates at the intersection of I-15 and the I-215 Beltway. Ground will be broken soon for this 1.2 million-square-foot project, which will include a multiplex theater, restaurants, a boutique hotel and offices.
The flagship for this new trend of combining retail with other commercial opportunities is The District at Green Valley Ranch, which opened in April 2004. In addition to 400,000 square feet of high-end shops and restaurants, the space above the stores was planned for 88 condominium units and 24,700 square feet of office-over-retail. Charles Van Geel, senior director of office leasing for American Nevada Company (ANC), developer of the unique project, said interest in the office space over the shops surpassed the company’s original expectations and all the offices have now been leased. The 30-acre complex also contains a three-story, 59,818-square-foot, Suburban Class A office building.
American Nevada is working with JMA Architecture Studios on designs for the second phase of The District, which will be located on a 30-acre parcel just east of the existing project. According to ANC President John Kilduff, this phase will contain more upscale shops and restaurants, some office-over-retail and a separate condominium component. A park at the entry will serve as a gathering place for shoppers, who will be shuttled between the two sections of The District by a trolley system. A Whole Foods Market and a few other shops are scheduled to open this fall.
Mixed-Use Developments Serve New Communities
As the population spreads out into land on the outskirts of Las Vegas and Reno, planners try to incorporate centers that combine living, work, shopping and play in one place, not only for the convenience of residents, but also to discourage constant commuting, which can lead to traffic and air pollution. Montecito Companies is developing three large mixed-use projects within Centennial Hills, a 36,000-acre master-planned community in the far northwest of the Las Vegas Valley. Tenaya Village Center, near the intersection of US 95 and the I-215 Beltway, contains 100,000 square feet of retail, including an auto mall, in addition to a business park. Nearby, the Montecito Town Center is a 200-acre mixed-use development, which will contain not only retail components, but also a hospital and medical offices, a community park, a private school and a housing sub-division. Further out US 95, Montecito will build another 34-acre center at the entrance to the 1,600-acre community of Kyle Canyon, once development reaches that intersection.
Industrial Holding Its Own
One of the major challenges facing developers of industrial property is the high and ever-increasing price of land. Parcels once zoned for industrial use are being snapped up by residential developers and re-zoned for housing. This puts tremendous price pressure on the remaining commercial parcels.
DP Partners is developing the LogistiCenter project in North Las Vegas, built on 102 acres purchased in 2003. Brad Myers, the company’s regional manager, commented, “I’m glad we purchased the land when we did. If we had to go out today and buy land for a new project, it would be really difficult to make it pencil out.” Two buildings, both about 266,000 square feet, have been completed at the site, and Phase III will be another building the same size, slated to begin construction by the end of 2005. On buildout, the project will contain approximately 2.1 million square feet of industrial space.
Economic Recovery Helps Office Market
Mark Bouchard, managing director of CB Richard Ellis in Las Vegas, predicted the improving economy will lead to more large office projects in Nevada in the near future. “With a sound national economy, companies will be looking to expand their headquarters, and Southern Nevada is on a lot of radar screens,” he said. Some of these projects may well be mid- or high-rise buildings, anywhere from seven to 10 stories tall, as developers look to get the most payoff for the smallest footprint on Nevada’s expensive land. “If people already own property, they can be successful in penciling out flex/office and office buildings up to four stories,” said Bouchard. “But, depending on location, they should at least consider going vertical. It’s not intellectually sound to believe land values are going down.”
CENTRA Properties’ CENTRA Point project illustrates another trend in the office market: expansion into new suburban areas that were bare land a few short years ago. The master-planned 20-acre development, located at Durango Road and the I-215 Beltway in southwest Las Vegas, contains seven 2- and 3-story suburban Class A office buildings, with plans recently announced for an eighth, a 50,000-square-foot build-to-suit headquarters for GC Wallace Engineering.
In Spanish Springs near Sparks, Hawco Properties is developing garden-office projects intended to make it easier for residents in what was once a bedroom community to work close to where they live.
Success Spills Over into Rural Nevada
Elaine Barkdull of the Elko County Economic Diversification Authority reported several projects in the Elko area will be developed this spring. Home Depot recently held a ceremony to “break snow” for a new store, the first of its kind in Elko County, and will proceed with construction as soon as weather permits. The 20-acre Elko Geothermal Park is also awaiting warmer weather to begin development, and hopes to attract small industrial users that can take advantage of the heating provided by Mother Nature. Construction is already underway at the Phoenix Mine project in Battle Mountain, and Newmont Mining is completing the permitting process for construction of a power plant that will bring in 600 workers.
In Pahrump, which celebrated the opening last spring of its first Wal-Mart store, plans are proceeding for a retail component at the Mountain Falls master-planned community, and the Pahrump Nugget resort is building a convention center and a bowling alley. The community’s first hospital, the 25-bed Desert View Medical Center, should be completed by December, and adjacent physicians’ offices are also under construction.
The Market Squeeze
As population growth increases the demand for support services such as retail outlets and healthcare facilities, and with land prices rising across the state, the commercial real estate market is caught in the middle: rising demand and dwindling supply are a textbook formula for rising prices. The challenge for developers is to find creative ways to build projects – on smaller parcels of land, going up instead of out, using creative financing, finding multiple uses for the same buildings – whatever it takes to ensure continued success in this unique market.
