After a slow start to the year, retail sales had a much-needed pickup in the second quarter of 2019. Q2 was the best quarter in the past year with respect to volume and had almost $55 million in transactions with an average price per square foot of $261.
One of the most notable sale transactions was Cabela’s, which sold for $26,213,000 ($205 PSF) as part of a joint venture led by Sansome Pacific. They acquired 11 Cabela’s locations from Bass Pro Shops for $324.3 million and structured as sale-leasebacks. The Reno location is 127,616 square feet on 2 parcels totaling 22.50 acres. The portfolio encompasses more than 1.6 million square feet of space with an additional 277 acres of land. The sale-leaseback term for the assets is 25 years. The locations of the stores were not released. The second quarter of 2019 had about 60 lease transactions, all under 10,000 SF. The largest lease deal this quarter was for a salon at 5093 S. McCarran Blvd, located in the Smithridge Plaza with Trader Joe’s & Stein Mart. The tenant leased the 7,915 SF stand alone retail building which was previously occupied by Marinello.
The retail leasing market is currently steady and is expected to remain steady throughout the rest of the year.
In Q2 of 2019, the Las Vegas valley retail market is shifting towards expansion mode and consists of approximately 112 million SF, which includes 13.5 million SF of power centers, 17.5 million SF of community centers, 24.6 million SF of neighborhood centers and 10 million SF of strip centers. As the market improves, the current vacancy rate is 6.4 percent, which represents a drop by about 20 basis points from last quarter.
The average lease rate is approximately $1.82 PSF NNN. Concessions depend on multiple factors such as tenant’s strength and length of term. The current average sale price has dropped to about $212 PSF (that number changes dramatically depending on the submarket) while cap rates are 6.4 percent.
There were 139,000 SF of projects delivered in second quarter with 783,000 SF still under construction. Projects include the new 126,000-square foot retail and entertainment venture called Area 15.
As the economy continues to recover, the addition of multi-family developments along the 215 Beltway and I-515 Freeway will be a catalyst to propel the demand for more retail space. As we continue to experience closings from larger tenants or downsizing, a new breed of retail businesses backed by unusual capital, such as Amazon or Google, and new quick service restaurants from other states will continue to search for the best spaces.