Building Nevada - July 2002

Commercial Real Estate Heating Up

Taking the Temperature of Nevada’s Real Estate Companies

by Stephanie Beck

While the economy shows promise in its ability to rebound across the country, Nevada is determined to continue its focus on diversification and growth. We reported in our March issue on the results of a survey showing that developers throughout the state had a positive outlook for the growth of future projects and opportunities for new businesses. Once again, we have taken the pulse of an industry focused on accommodating the needs of people moving into or moving up in the state of Nevada. Those surveyed give us the inside scoop on the current state of commercial real estate companies, and what future prospects look like.

Of the 20 companies responding to the survey, 13 were based in Southern Nevada and seven in the Reno/Sparks area.

Areas of specialty:

Retail 17

Industrial 17

Office 18

Land 2

Additional specialties listed included investment, development services, finance services, appraisal, mortgage brokerage, project management, property management, market research, surveying, engineering, landscape design, technology and communications.

What percentage of your clients come from outside your local market?

Our survey results show that approximately 50 percent of the amount of real estate business came from outside our respondents’ local markets. Ten companies reported that they receive under 50 percent of their business from outside the local market, while eight companies listed over 50 percent of business coming from outside.

Please rank the importance of the following factors in clients’ decisions to lease or buy:

 (#1, #2, #3): Location, Cost, Amenities.

Following the old axiom about the most important factors in real estate (location, location, location), Nevada real estate professionals told us that it was the most important determination for them in choosing a property.

Location 1.3

Cost 1.8

Amenities 2.9

Which market segment do you think will experience the greatest growth in the next 12 months?

Office 4

Retail 9

Industrial 6

Apartments 1

Rank the potential of the following (from 1 to 5) in their ability to inhibit growth in the market.

(#1 has the greatest potential to inhibit growth, #5 the least).

Land Availability 2.7

Infrastructure 2.7

Power/Utility Costs 2.8

Water Availability 3.4

Availability of Financing 3.8

What do you predict for the commercial real estate market as a whole for the next 12 months?

Business will be much worse than previous year. 0

Business will be slightly worse than previous year. 1

Business will be about the same as previous year. 3.5

Business will be slightly better than previous year. 11.5

Business will be much better than previous year. 4

There didn’t seem to be much difference between respondents in Northern and Southern Nevada. Both, on average, predicted slightly better conditions for the upcoming year. Answers with decimals indicate more than one box was checked on the form.

Bonus Question: Do you feel the approval of the Yucca Mountain project would negatively affect your business?

If yes, please estimate on a scale of 1 to 10 the negative impact it would have (1 being "a very small negative impact" and 10 being a very large negative impact").

Yucca Mountain has always been a subject of debate in Nevada, but never has it been as hot or as controversial a topic as it has been over the last year. We decided to ask how real estate companies ranked Yucca Mountain as a challenge facing the real estate industry as a whole. The majority of our respondents had a positive outlook for what Yucca Mountain holds, with 12 answering No, and eight answering Yes.

Of those who answered yes, most of them ranked the problem under a five in terms of importance. Yucca Mountain’s overall average was 4.6 in terms of how it will affect the real estate industry.

High Hopes for the Future

While the majority of respondents agree that growth is going to stay consistent in the real estate industry throughout the rest of 2002, CB Richard Ellis Managing Director Michael Schnabel has big plans for success in Northern Nevada this year. "The first half of 2002 was very strong, and I expect the second half to be equally as strong. Offices have been the slowest area, but apartments are booming. There’s also an extremely strong demand from investors in California to buy property in Nevada," said Schnabel.

He explained that these California buyers are primarily investors seeking opportunity in a state that is ripe with opportunity. Schnabel even expressed surprise at how fast the apartment inventory is filling up. He indicated this could eventually have a positive effect on home purchases, since interest rates are low and many people are renting temporarily only until they find a suitable home.

Schnabel’s counterpart in Southern Nevada, CB Richard Ellis Managing Director John Knott also made positive predictions for the real estate industry in Nevada. "Simply put," he said, "I cannot think of a better place to be active than in Las Vegas." Knott cites past growth in the Southwest and Nevada’s strategic position in the middle of this booming area. It’s this combination that Knott feels makes Nevada a prime location for those interested in leaving overpopulated areas in states such as California and Arizona.

The focus real estate professionals have on preparing for growth shows us that Nevada is certainly not standing still, but steadily moving forward through strategic planning and dedication.