In Northern Nevada, retail is climbing toward the mountains, with a retail lifestyle center proposed at the base of Mt. Rose Highway. In Southern Nevada, it’s climbing toward the sky, with several proposed multi-story retail projects and residential high-rise buildings with retail components on the ground floors.
Land in Nevada’s metro areas is scarce, precious and going fast. The population is increasing faster, residential building increasing faster still, and retail is considered under-served.
Developers in Nevada are doing their best to remedy this. Nevada’s economy is robust and Nevada’s population is reaching levels of affluence that are attracting new developers and retailers into its cities.
Vacancy rates in Southern Nevada retail centers are holding at 4 percent across the board. Even with all proposed projects and those coming online, existing centers aren’t suffering.
“When a tenant leaves, there’s another in line to absorb the space,” said Scott Marker, vice president retail properties, Colliers International. “We’ve seen that recently in House to Home, which was absorbed by a Burlington Coat Factory. A Good Guys was absorbed by Lane Furniture. Good real estate tends to get absorbed, especially if the shopping center is in a desirable area, high traffic, easy access – there will be someone to take it over.”
New projects are leasing out before they come online. Once a new anchor is announced, the “usual tenants” follow and fill in, according to Marker. For example, a grocery-store anchored center will get a coffee shop, video store, dry cleaner and florist. And there’s a nail salon in every center. “Ten years ago, it was pizza places. Everybody wanted to put in pizza places. Nail salons are the tenant of the day,” Marker said.
Smoke shops are springing up in a variety of centers, with owners willing to pay high premiums to get into new centers. Balancing smoke shops are health and fitness clubs, many geared specifically toward women.
“The market is obviously following all the new housing growth, and most housing growth is on the periphery of the city, following the new beltways. As those expand or improve, housing moves into those areas,” said Kit Graski, senior vice president, Voit Commercial. “Right now we’re seeing a lot of power centers being developed, or in pre-development or under construction, and the reason is that outlying areas now have enough homes to support larger anchored centers.”
Retail follows rooftops – shopping centers build near residential centers. But it’s difficult for retailers to anticipate the needs of new residents by moving too far ahead of growth – projects on the outskirts of the city need to wait for significant residential growth to support them. “It’s tough for retailers in malls across the U.S. to open a store in an area so new that [there aren’t enough people and] sales are average,” said Marker. “They need population density to support the mall before the developers build it.”
It’s also desirable to have malls in new master-planned communities. Residents need shopping close to home to alleviate traffic and air quality problems, to save time and money – but the reality is, population density is required to support all the projects proposed or they may not be built. Of the four new malls proposed in Las Vegas, it’s possible only two will be built.
Northern Nevada has achieved the necessary density to attract large-scale retail projects. The Reno/Sparks/Lake Tahoe area is considered under-served by retail, and at least one developer, Bayer Properties from Birmingham, Ala., is looking to move into the market.
Lifestyle centers combine open-air retail centers with landscaping, restaurants, small and large retail and an entertainment component like a multiplex theater. Birmingham was one of the first cities in the country with a lifestyle center; construction started in 1997 and Bayer is working on phase four of that project now. The aesthetic quality of the center with its open-air venue was so successful the developer went looking for other markets with underlying fundamentals similar to those responsible for the Birmingham project’s success.
Reno – and Northern Nevada – came screaming out of the gate. Reno’s one major mall isn’t enough for the growing affluence being created in the marketplace, and because of that, many people head to cities like Sacramento and San Francisco to shop. “There was a lot of leakage of consumer dollars leaving the market,” said Jeffrey Bayer, president, Bayer Properties.
Finding land wasn’t easy, but Bayer purchased 200 acres where Mt. Rose Highway crosses I-395. The first phase of its Summit Sierra project will incorporate 70 acres, and as the project builds momentum, additional phases will be built to serve Northern Nevada, creating Reno’s first lifestyle center.
Initially Bayer found Reno a hard sell to retailers – perception was a blue-collar, older market without much consumer demand. But once the developer saw the upscale residential building taking place, it was able to convince retailers to check out the area, and the center is now 85 percent filled. Several retailers new to the area are coming onboard, including Pottery Barn and Dillard’s.
With land availability decreasing and costs increasing, developers need to be more and more creative with their use of the land. “The Las Vegas market is upside down and crazy, with land prices and a huge demand coming in from all different avenues,” said Terri Sturm, CEO of Territory, Incorporated, which develops and manages retail centers in Southern Nevada. “There is going to be a huge need for more creative uses of land or mixed-use centers that combine residential with retail and office – everything together. With land prices at a million dollars an acre and more, we can’t afford to build traditional centers on that land.”
Creative use means mixing residential, retail and light office in mixed-use centers, or creating power centers that bring big- and medium-box users together in one center with very little small retail in between. A power center might house a Target Greatland, Home Depot and Wal-Mart.
Sturm has land she purchased in Las Vegas before prices started rising, so Territory is able to build the traditional center it originally planned. “If I were buying now and paying what I suspect the land is worth, I’d be going back in front of the city asking for multiple levels, some way of incorporating perhaps more offices, or residential-over-retail,” said Sturm.
There are already 100 proposed high-rise multi-family residential projects with ground floor retail components proposed in Las Vegas; experts estimate perhaps half will be developed.
Land prices are being driven by demand, which isn’t unusual, but demand by home builders is so high that commercial land is leaving inventory and becoming residential, and that is unusual. “We’re seeing land that would have been industrial and warehouse use turned into houses,” said Sturm. “Our biggest competitors are home builders, because they’re willing to pay more per acre than we can justify if we’re going to turn the property into a power center.”
Not all of the land is becoming homes. Land is still available for retail, which is keeping pace with residential – for now. Territory is building grocery-anchored centers in Centennial Hills and the second phase of a center at Southern Highlands; it’s leasing a center at Blue Diamond and Decatur.
Marnell Properties is developing a community retail center at Eastern and Russell. McCarran Marketplace will incorporate an 8-acre park to create a buffer between airport expansion and a residential neighborhood considered under-served by retail. The mixed-use project also houses a retail component of big- and medium-box tenants.
“We’ve also planned for some softer type of development: single-story office quasi-retail buildings,” said Marnell Properties President Brad Schnepf. “It’s not going to be as busy day-to-day as having retail right up against the neighborhood.”
CENTRA Properties and Turnberry Associates are bringing the 1.2 million-square-foot Town Square Las Vegas to the southern end of the Strip, a lifestyle center that will include a movie theater, restaurants, hotel and offices.
The Montecito Company’s Town Center surrounds the 19-acre Montecito Marketplace, a grocery-anchored retail center located in a master-planned residential and commercial development near the intersection of US 95 and the I-215 Beltway.
The District at Green Valley Ranch is another lifestyle center, bringing together a mix of restaurants and retail, office space and luxury residential lofts with 400,000-square-feet of shops and restaurants.
Land prices continue to rise, supply continues to decline, and developers across the state continue finding resourceful, creative ways to utilize the land, from two- and three-story retail facilities in the south to lifestyle and mixed-use centers in the north. Retailers will continue to fill the centers, absorbing space and making Nevada the perfect place to live-work-play… and shop.