The Las Vegas commercial retail sector was impacted by weak local consumer spending and financial challenges impacting national retailers in 2008. During the fourth quarter of the year, the market expanded by 236,000 square feet reaching 50.5 million square feet in 326 anchored retail centers. On the year, the market welcomed 1.9 million square feet, although expansions were well below the record-setting construction of 4.3 million square feet reported in 2007.
Market demand turned negative during the final quarter of the year as nearly 200,000 square feet of net move-outs, or vacancies, occurred. Recent vacancies included the closure of area Linens ‘N Things, Mervyn’s at Grand Canyon Parkway and other selected anchor sites. The latest quarterly downturn offset positive net absorption through the first three quarters of the year, bringing annual net absorption to a modest 155,700 square feet. Demand during 2008 represented the lowest net total since we began tracking the market in the mid-1990s.
Market activity resulted in a vacancy rate of 7.4 percent, which was up from 6.6 percent in the preceding quarter (Q3 2008) and up from the 4.0 percent in the prior year (Q4 2007). As of year-end, approximately 3.2 million square feet of retail space was under construction.
The deceptively long year of 2008 really happened and was not a bad dream. The nightmare that could not be woken up from brought declining home values, restricted credit, rock bottom consumer confidence, vaporized retirement accounts, twenty-four bank failures, elevated unemployment and high gas prices, crippling the economy. The spillover affect on retailers and restaurants was inevitable. One may say it was pre-ordained as consumers have spent more than they made throughout the last decade. The market saw over 150,000 stores close nationally last year, compared to 135,000 in 2007, according to the International Council of Shopping Centers (ICSC). Over sixty of these stores are in the Reno and Sparks trade area. To quote the “Oracle of Omaha,” Warren Buffet, “You don’t know who is swimming naked until the tide goes out.” With many retailers closing or consolidating we have not seen the end, and ICSC predicts we will see another 150,000 store closures in 2009, but Strategic Resource Group, based in New York, has a bleaker forecast of 200,000 store closures in 2009 and the possible closure of 2,000 to 3,000 malls. Fortunately, the nations Gross Domestic Product (GDP) growth was estimated at 1.3 percent for 2008. This is encouraging, as consumer spending accounts for 70 percent of the $13.8 trillion GDP.