The Las Vegas economy is continuing its slump, and commercial real estate and development are paying the price.
Pressured by overbuilding and retail outlets closing, Las Vegas recorded its highest retail and office vacancy rates in two decades. As a result, commercial construction has fallen 66 percent in the past year.
Triggered by Las Vegas' 2-year-old housing slump and coupled with this year's slowdown in tourism and gaming and commercial construction, the local economy is in a recession.
"This is the worst I have seen it here in 20 years," says John Restrepo, an economist and principal of Restrepo Consulting. "People are in shock because they are used to the economy bouncing right back, but I don't think we are going to have that quick of a recovery."
Keith Schwer, the UNLV center's director, calls it the first recession to hit all aspects of the local economy since the 1980s. He maintains it's not likely to recover until the second half of 2009 at the earliest when new resorts will provide a boost.
"We have had such a long period of economic expansion and growth, I don't think anybody thought we could have a recession like this," Schwer says. "With housing, we know it was a case where we overbuilt, overlent and overborrowed, and I think it was the same with commercial development. When it comes to commercial development here, it is driven by the demand of travel and tourism."
That's bad news for developers that during the good times placed their bets on Las Vegas and expected tenants to fill out their space. And it's a hard lesson for some who have long said Las Vegas' economy was immune to the type of slowdown faced in other parts of the country.
Economic Index:
Southern Nevada's economy continued to show signs of decline as nearly every indicator fell from a year ago, the Center for Business and Economic Research reported.
Building permit activity produced some of the larger percentage drops, while total employment edged down for the second straight month and gaming revenue slipped for the sixth straight month.
- Fewer people visiting and fewer people are moving to Las Vegas.
- Employment growth, always a strong suit dipped 0.7 percent
- The unemployment rate shot to 6.5 percent -- above the national rate
- Gaming win is down and taxable sales are down
CityCenter Woes:
CityCenter -- which MGM Mirage officials have called the most expensive private commercial development in U.S. history -- is expected to include six high-rise towers with a 4,000-room hotel-casino, condominiums, boutique hotels and a retail, dining and entertainment complex.
MGM, Dubai Fall Behind on $3.5 Billion Loan for Las Vegas CityCenter PlanMGM Mirage and Dubai World are late in raising as much as $3.5 billion for their $11.2 billion CityCenter project in Las Vegas because banks saddled with debt to casinos and hotels are wary of making new loans.
Deutsche Bank AG and Credit Suisse Group, the Zurich-based bank that advised Dubai World last year when it invested $5.1 billion in MGM, are among the holdouts, bankers with knowledge of the matter said.
``No company in America is having an easy time doing bank deals right now,'' Murren said in an interview. ``There will be some banks that can't commit because they have a lot of exposure in the area or don't like the pricing.''
``Wall Street firms are scrutinizing their extension of credit, particularly to the gaming industry, where the sentiment is pretty weak,'' said Michael Paladino, an analyst at Fitch Ratings in New York.
The amount of commercial and industrial loans from banks, plus short-term commercial paper, fell almost 3 percent during the past year to $3.27 trillion, according to data compiled by the Federal Reserve.
Building the 76-acre ``city-within-a-city,'' is costing Las Vegas-based MGM and Dubai about $100 million each per month.
The Las Vegas casino industry has been struggling with revenue falling 16 percent in May, the fifth straight monthly decline, amid near-record gasoline prices and rising unemployment in the U.S., according to the Nevada Gaming Control Board.
Moody's Investors Service announced earlier this month that MGM Mirage's ratings were on review for a possible downgrade, in part because of the uncertainty of CityCenter's financing.
The review was part of a series of moves affecting Moody's ratings of several casino companies that operate in Las Vegas, driven by declining gambling revenue.
Taxable Revenue:
May sales soft for state businesses
Taxable revenue from deals down 12 months out of 14 -- Nevada's economy continued to sputter in May as business sales of taxable goods dropped 1.5 percent from May 2007, according to a report released Tuesday by the state Department of Taxation.
Through the first 11 months of the fiscal year, sales in Nevada are off 2.1 percent from the same period a year earlier. The report was just more bad news for a state already reeling from growing unemployment and falling gaming revenues.
Since the Legislature concluded its special session on June 27 by cutting state spending by $275 million, the Nevada unemployment rate has risen to a 14-year high of 6.4 percent and gaming has gone through its worst month in at least 10 years, with gaming tax receipts dropping 22 percent.
Business Growth:
New business grows scarce in LV Valley
The country's economic downturn hampered efforts to diversify Southern Nevada's economy in the last year.
Numbers from local agencies designed to attract new businesses to the Las Vegas Valley reported dips in the number of companies moving to the area, and recorded drops in the economic impact of corporate growth here.
The Nevada Development Authority, a nonprofit that lures companies to Las Vegas, helped bring in or expand 30 companies and 1,401 new jobs in fiscal 2007, which ended June 30. That's down from 56 companies and 2,725 new jobs in fiscal 2006.
Housing:
Vegas Housing Market Continues Slipping -- Steepest decline in the Nation!
The Las Vegas housing market continues to slip. A nationwide housing index shows prices in Sin City fell 28.4 percent in the month of May.
One realtor said she is readjusting prices right now.
The Valley is full of for sale signs, for those who are selling, the news is not good. The Case-Schiller Housing Index shows home prices fell by the steepest rate ever in May and Las Vegas is down 28.4 percent.
Two out of three homes are being sold after foreclosure, bringing down median sales prices.
"It’s a buyer’s market for sure. "
I moved here from Jersey. I'm going to rent first but seriously look hard in this area," said resident Bert Potts.
The housing index has not reported an overall rise in home prices in any month since August 2006.
Nationwide, the 10-city index has fallen 16.9 percent, the biggest decline in its 21-year history.
The steepest decline is in Las Vegas.
Starbucks Index:
Las Vegas tops Starbucks losers
The Starbucks index is pointing down in Las Vegas. Starbucks Corp., the coffee-shop chain stung by a slowdown in sales as strapped consumers shy away from $4 lattes, is staging the biggest retreat in its 37-year history, closing 600 of 11,168 U.S. company-owned and licensed stores.
Las Vegas is taking the biggest hit, losing 16 of the once-trendy cafes, or 10 per cent of its total.
The Nevada city's gambling-driven growth in the 1990s proved irresistible to Starbucks, which has about 155 outlets there today, according to the store locator on the company's website. The surge and contraction at Starbucks mirror the Las Vegas economy, said Keith Schwer, director of the Center for Business and Economic Research at the University of Nevada in Las Vegas
"We've gone from having a better unemployment situation than the national economy to one that is slightly less," Schwer said.
LOSING THEIR SOLES
Crowds sparse at twice-a-year shoe convention
Sparse foot traffic this week in the Las Vegas Convention Center suggests fewer people than usual made tracks to town for one of the shoe industry's biggest conventions.
Thanks to an economic kick in the shins from increased manufacturing costs and decreased consumer spending, folks flogging footwear this week at the World Shoe Association Show say it's unlikely the 35,000 or so people who typically attend the semiannual event made the trip this time.
People who did make it say they weren't surprised attendance is down because manufacturers and retail buyers -- especially small, specialty companies -- are finding it hard to make ends meet.
"Customers owe money to their suppliers. They don't want to run into them," said Neal Marks of Hazan Shoes Inc., maker of affordable, stylized dress shoes sold in stores such as Mastroianni Fashion in the Las Vegas Valley.
What people will do for money:
More Women Donating Eggs In Bad Economy
LAS VEGAS -- As the economy continues to stagnate, more and more women are looking for ways to make ends meet -- and some are eying their eggs.
As TV station KVVU in Las Vegas reported, women across the country have been heading to fertility clinics to donate their eggs. Some say it's altruism, but others are more frank.
Melissa, who declined to give her last name, admitted the main reason she's donating eggs is because she's struggling financially.
"My husband has had me stay home for the last five years. I stayed home for my children, so the money definitely benefited my family," she said.
The Center For Egg Options in Illinois, the number of women donating has increased significantly since April.
"There's no reason to think that suddenly there's 30 percent more people who have suddenly had this inner feeling to help out people. And what's changed? It’s the economy," said fertility specialist Ed Marut.
Fertility centers have also a surge repeat donors and surrogates.
Dr. Bruce Shapiro, of the Fertility Center of Las Vegas, said compensation is $3,000 to $5,000, but he said he hopes the economy is not the main reason more women are donating.
"We really try to have people who donate for altruistic reasons. That's the best of all worlds," Shapiro said.
He said it is a fairly simple process that takes about three weeks.
"It's more invasive than donating sperm, but still, it's painless, and there's more time involved, but we try to make it as smooth a process as possible," Shapiro said.
He said the side effects of donation usually include some aches and cramps, similar to those of a woman's period.
Volunteerism Index:
Las Vegas' Volunteerism Ranked One of Worst in Nation
For the second year in a row, Las Vegas' volunteerism is ranked one of the worst in the nation. The study by the Corporation for National and Community Service puts Las Vegas at number 49 out of 50 major cities.
We may be one of the worst in the nation, but some organizations believe volunteer rates have actually improved. But with the local economy the way it is, one agency, who needs a large commitment from their volunteers, may be hurting more than others.
It's only been five months, but for Desiree Tarr, being a Big Sister to 8-year-old Victor is a priority.
"You always think about the extra hours you could put in at work to get the extra money so you can be where you were before, but I think it is important to remember that you still need to give back," she said.
Like most volunteers with Big Brothers Big Sisters of Southern Nevada, she dedicates her time and money to making sure Victor has a good mentor.
"Gas prices is hard because he lives pretty far from me," she said.
This organization says they've seen a 50-percent drop in volunteers in the last year.
"Definitely, because people's focuses are on themselves, on the finances. They have less time and room to look at doing for the community," said Courtney Frank of Big Brothers Big Sisters of Southern Nevada.
