When Nevada Business Journal published its first high-rise article two years ago, there were more than 100 high-rise condo projects slated for Southern Nevada alone. In response to a more stringent market, modified building conditions and a need for capital, a good number of the 100-plus projects have been delayed or cancelled, including W Hotel, Charlie Palmer Hotel, Sandhurst, Vegas888, Las Ramblas, Icon Las Vegas, Liberty Tower, Ivana Las Vegas, Urban Village, Montreux (The New Frontier), 4275 Dean Martin Drive and Maxim Hotel and Casino.
Beginning in 2003, the condo boom in Las Vegas rode the crest of an explosive residential market fueled by record-setting growth in Southern Nevada. Like miners pouring into Virginia City following the initial discovery of gold, real estate speculators flooded the market convinced they could make a fortune by flipping properties. The strategy worked for some investors, but only until the market slowed in what many financial experts claimed was a natural correction to more realistic conditions. At its peak around 2005, more than 100 high-rise projects were somewhere in the pipeline as developers scrambled to cash in on what they perceived would be an increasing demand for condo units. As the market slowed and interest rates rose, however, spec buyers licked their wounds and made themselves scarce. “The residential investor has moved on to other markets,” said Dusty Allen, managing partner for Streamline Tower condo development.
With around 7,000 new residents arriving each month, Las Vegas continues its steady advance towards a population of 2 million. The overall strength and character of the market has changed with the exodus of the condo speculators. Investors have been replaced by buyers who intend to keep the property for their own use or as a rental property. The condo market has strong appeal for empty nesters – especially baby boomers – who want to downsize and young professionals without children who don’t need the amenities of the suburbs. With commutes from outlying areas becoming longer and longer, condo buyers are attracted by the convenience of living and working in the dynamic city core.
Among the class of people who own a home in each of the popular hot spots around the globe, having a presence in Las Vegas has become a must. Always an entertainment Mecca that never sleeps, in recent years, the city has broadened its appeal with world-class restaurants, shopping and cultural events. “It has changed from a tacky gaming community to a sophisticated city,” said John Riordan, senior vice president of sales and marketing for Turnberry Towers.
Survival of the Fittest
While today’s market favors the buyer by offering a variety of products to choose from, developers face increasing challenges. “It’s a time when the strong survive,” emphasized Jack Christie, vice president of sales and marketing for Trump International Hotel & Towers Las Vegas. Rising costs and the scarcity of land have put the damper on a number of projects. “Turnberry Towers’ construction costs have more than doubled since 1998,” Riordan noted. To better ensure the success of a high-rise condo project, Christie said the following conditions should be in place.
• Builder and architect are experienced in high-rise construction.
• Financing is secured.
• Sales department has a positive track record in the luxury market.
• Project has local connections who understand the local market.
• The operator is a name brand, such as Trump or Marriott.
• The timeline of the project does not exceed 36 months.
Notable survivors in the residential condo market that have either been completed or are under construction include Sky Las Vegas, One Queensridge Place, Turnberry, One Las Vegas, Panorama Towers, City Center, Metropolis and Streamline Tower. Similar successes in the hotel condo market include The Cosmopolitan, The Residences at MGM, Trump International Hotel & Towers Las Vegas, The Platinum and Palms Place.
Situated on 15 acres at the corner of Paradise Road and Karen Avenue, the Turnberry project consists of four towers at Turnberry Place and Turnberry Towers. Amenities to the living quarters just one block from the Strip include limo service, a concierge system, membership in Stirling Club (a private club), pool areas, putting greens and dog runs. Built by experienced condo developer Turnberry Ltd., units range in price from $525,000 to $9 million throughout the development. About 140 condos are available at Turnberry Towers and between 60 and 100 units are available for resale each year at Turnberry Place. While most initial buyers several years ago were in their 60s, the majority now are 40ish Southern Californians who want a getaway home to use several weekends a month, according to Riordan. The company discourages speculation by requiring a 30 percent down payment, restricting rentals and not allowing resale before closing. “We want to make sure that the people are there to close on it,” Riordan said.
The only condo high-rise in the new downtown Entertainment District, Streamline Tower includes 21 stories an luxury living above Las Vegas Boulevard and Fremont Street. Prices for the 275 units range from around $400,000 to $1.4 million. Amenities include private balconies, a rooftop pool, a fitness center and concierge service. According to Allen, about 30 percent of buyers (who range in age from 45 to 65) want a primary residence they can move into right away. Around 40 percent want to put the condo into a rental pool temporarily and move in later. The remaining 30 percent are buying for investment purposes. With about 60 percent of the units sold, the building is scheduled for occupancy next year.
Trump International Hotel & Towers Las Vegas
Capitalizing on the brand name of its developer, the Trump hotel-condo project at 2000 Fashion Show Drive is characteristic of The Donald. Tower I is scheduled for occupancy early next year with 1,282 units having been sold at an average cost of around $1,300 per square foot. Construction of Tower II will immediately follow the completion of Tower I. About 95 percent of buyers, many of whom are “Trumpies” or fans of Trump, intend to put their units on the rental program, according to Christie. “The majority of our buyers are familiar with the Trump name and want to be associated with it,” he explained. Christie believes the sales are an indicator of the economic vitality of the country’s younger generations. “I’ve never seen such a wide variety in age in the buyers. I’m amazed at how many younger people can spend $800,000 on a unit,” he said.
Even though many high-rise projects have been derailed recently, real estate movers and shakers agree that Las Vegas will continue to grow skyward, albeit at a slower pace than during the early years of condo mania. “We’re down to 5 percent buildable land left in the Valley. The limited land inventory drives the vertical construction,” Allen said. Riordan agreed that there will always be a demand for condos. “The high-rise lifestyle is here to stay,” he emphasized.
The Urbanization of Reno
While growth in the Truckee Meadows has caused suburban sprawl in every direction, it has also breathed new life into downtown Reno. Efforts to revitalize the declining city core over the past decade have been successful in attracting new restaurants, cultural and entertainment options and a host of special events that bring people downtown. Each addition to the mix, such as the Truckee River Whitewater Park, has increased the synergy that convinces visitors and residents alike that downtown Reno is the place to be. Only when people begin living downtown, however, will the renovation of Reno have created a viable neighborhood where residents live, work and play. “I think we have to give our mayor and city council a huge amount of credit for what’s happening downtown. They have vision,” said Kathie Bartlett, a Realtor with Dickson Realty, who is selling units at The Palladio.
Somewhat like Las Vegas, the target market for downtown condos in Reno is largely upwardly mobile young professionals and older empty nesters who seek a more worry-free lifestyle. “We think our market is a combination of empty nesters who may have multiple homes and want to be able to just unlock the door and have access to an urban lifestyle,” said Martha Shelley, a partner with Capstone Partners LLC, the company developing the Arterra project. “Singles and couples also want to establish residence in Reno, as well as young couples with no children.”
With a few high-rise condominium projects welcoming new residents and with other projects either in the construction or planning phases, it appears that the long-awaited makeover of downtown is finally coming to fruition. Projects completed or near occupancy include the Residences at Riverwalk (formerly the Comstock Hotel), Sierra Vista Towers (formerly the Reef Hotel and Casino), The Palladio and the Belvedere Towers (formerly the Sundowner Casino). Those under construction include The Montage (formerly The Golden Phoenix) and Grand Sierra Resort and Casino (formerly the Reno Hilton). Developments still on the drawing boards include Wingfield Towers on Arlington Avenue between Court Street and Island Avenue, The Waterfront on Lake Street at the former Bundox restaurant site and Arterra on Liberty and Sierra Streets.
With 185 residences in 16 stories of glass and steel on Liberty and Sierra streets, Arterra will utilize an art theme to position itself in the downtown arts district. Ground breaking has been delayed until next year with completion scheduled for 2010, according to Shelley. Prices range from $300,000 to more than $1 million with amenities that include fitness rooms, an outdoor terrace, a fire pit and spas. “The major challenge is responding to the cyclical nature of all markets,” Shelley said. “If it was easy to do, a lot more people would be doing it.”
Condo living is bound to play a major role in the growth of the Truckee Meadows for some time to come, according to developers. “The demand will continue, but it’s hard to estimate how deep,” Clark explained. Demographics and the continued affluence of residents will affect demand along with the steady rejuvenation of downtown. “There’s a new vitality downtown and we have some quality developments down here. We really need more people living downtown…and to get Montage on line,” Clark said.
Fronting the Truckee River just steps from restaurants and theaters, The Palladio offers luxury living from $350,000 to $900,000. With more than two-thirds of the 92 units sold, the building is scheduled for occupancy in August. Despite its elegance, the road has been rocky from start to finish for this development. Over budget and behind schedule last year, it was put into court-receivership by the lender which enabled the project to continue. The mixed-use building includes amenities for owners along with 20,000 square feet of retail space and 5,000 square feet of outdoor dining along the river. “Our job is to satisfy the Merrill Lynch loan and then it reverts back to the owners (the homeowners association),” the receiver, Clark, explained.
Scheduled for completion by L3 Development next year, The Montage offers 380 units including lofts, tower residences, terrace townhomes, row houses and penthouses. Prices range from around $250,000 to more than $2 million and include such amenities as a dog run, fitness center, clubhouse, heated-year-round rooftop pool and 24-hour doorman.