Commercial Real Estate Market - October 2007

Retail Market Summary

2nd Quarter 2007

Las Vegas

June 2007 retail employment was up 3.1 percent (3,000 jobs) from June 2006, according to the Nevada Department of Employment, Training and Rehabilitation. The largest contribution came from the General Merchandise & Clothing sector, with 1,100 jobs added followed by Health & Personal Care Stores sector, with 300 new jobs and Food & Beverage Stores sector, with another 200 jobs.

In second quarter 2007, the Las Vegas Valley’s anchored retail vacancy rate increased from 2.7 percent in first quarter to 3.1 percent. This increase was accompanied by a rise in the average monthly asking rent, from $1.95 price per square foot to $2.03 per square foot NNN. The largest increase in average asking rent was in Community Centers ($0.17).

The Valley’s retail market was active because both direct absorption and completions were closely balanced. Direct net absorption kept pace at 763,920 square feet, resulting in an absorption-to-completion ratio of .81 feet of demand for every foot of new supply. As a result, the Valley’s inventory rose by 2.3 percent to 39,341,395 square feet.

The amount of retail-space under construction in second quarter amounted to 1,651,114 square feet, up 13 percent from first quarter, while planned space fell .76 percent to 2,210,409 square feet. If all of the anchored retail space presently under-construction or planned is completed (which is not likely), it would represent a 9.8 percent increase in the Valley’s retail inventory. RCG estimates it will take 6.8 quarters (1.7 years) to absorb all existing and forward-supply.

Reno/Sparks

The Reno/Sparks retail sector continues to show healthy growth despite a decidedly more downbeat housing market. Modest job creation, above trend wage growth and in-migration from California has helped to sustain consumer spending.

Retailers continue to expand to Northern Nevada not only in adding to existing stores, but also in launching new concepts as they continue to ride the momentum of five consecutive years of solid residential growth. Construction in the retail sector is robust with second quarter completion of 283,000 square feet; 709,000 square feet under construction; and 3 million square feet planned.

Vacancy rates have remained stable with second quarter overall vacancy increasing slightly to 7.8 percent, up from first quarter’s number of 7.121 percent. Low vacancy rates and new tenant activity coupled with the high cost of land have driven rental rates for multi-tenant space in new developments up to $3.25 per square foot per month. However, tenant push-back in rents has recently been noted in submarkets with excess standing inventory.

Significant new tenants entering the market include a 225,000 square feet Scheel’s All Sports (opening 2008), a 150,000 square feet Cabella’s (opening fall 2007) and Whole Foods (opening fall 2007). Summit Sierra and Legends at Sparks Marina, the area’s first lifestyle centers, are bringing new brands and restaurants to the trade area (more than 30 in Summit Sierra alone) catering to evolving demographics and consumer tastes. Additionally, second phases of Sparks Galleria, Sparks Crossing, Ridgeview Plaza and Summit Sierra are nearing completion.

Southern Nevada statistics compiled by Colliers International and Restrepo Consulting

Northern Nevada statistics compiled by Colliers International Reno