Downtown Las Vegas has been a consistent bright spot in the city’s sluggish economy.
Stores and restaurants are opening, new developments are sprouting, and tech entrepreneurs are streaming in to build the valley’s geek scene.
Amid the excitement, though, another aspect of downtown is just as noticeable but not nearly as welcoming: the area’s empty, undeveloped land.
Downtown is peppered with vacant lots, unlike many other major cities’ urban centers, which are more fully developed. Real estate experts say the empty parcels, which leave stretches of downtown eerily quiet, crimp property values and harm the neighborhood’s image.
Visitors and newcomers often don’t know whether a building was demolished or the site was never developed.
Either way, “it’s not a good perception,” said former Pittsburgh Mayor Tom Murphy, a senior resident fellow at the Urban Land Institute.
Nationally, developers have been filling downtowns with residential buildings, retail stores and offices as officials try to turn the once-ignored areas into thriving economic hubs. The same is true in Las Vegas, but success here has been limited, partly because of the recession and partly because it’s cheaper to build in the suburbs, where most locals would rather live.
Executives with online retailer Zappos are behind much of the recent boom. Through the $350 million Downtown Project, a private redevelopment effort, Zappos CEO Tony Hsieh and his partners have been buying old buildings and empty lots, financing tech startups and developing real estate projects, including the recently opened Downtown Container Park retail and entertainment complex.
But Hsieh’s group can’t build out the whole area. And while other developers have projects on the drawing board, for the most part, few are picking up the slack to bring life to downtown’s vacant land.
“The rest of the private sector has not caught up with him yet,” developer Jeff LaPour said.
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About 10 years ago, real estate investor Kamran Fouladbakhsh faced a dilemma.
The valley was in the midst of a frenzied building boom, and city officials wanted to clean up downtown, which developers planned to blanket with residential towers.
Many existing buildings, including several owned by Fouladbakhsh, were old and empty, except for squatters. Code enforcement officers ordered Fouladbakhsh and other landlords to board up the properties or spruce up their exteriors to make them look occupied.
Boarding them up often was a wasted effort, as squatters still would climb inside. Exterior upgrades ran between $50,000 and $150,000 per building, a heavy expense.
Landlords chose another option.
“We demolished,” Fouladbakhsh said.
By his count, property owners tore down 30 to 40 buildings in three years. Fouladbakhsh knocked down seven.
It was a frustrating time. But today, Fouladbakhsh says he is happy the city cracked down on squatters, even if it meant saddling downtown with empty lots. Even without the squatters, many of the buildings had problems, he said. They were bland and structurally unsafe. At the expense of creating a different kind of eyesore, tearing them down provided a clean slate.
“Cheap buildings cannot be saved,” Fouladbakhsh said.
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It could be years before all the lots are developed.
Banks, largely because of failed real estate deals, aren’t eager to hand out construction loans. That’s especially true in Las Vegas, which became bloated during the boom years with office parks, industrial buildings and strip malls, many of which went bankrupt and now are desperate for tenants.
And while downtown’s Zappos-led resurgence has piqued the interest of developers and business owners, most are waiting for others to build successful projects before they, too, pull the trigger.
“If a few buildings go up, others will follow,” Fouladbakhsh said.
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The vacant lots might crimp real estate values downtown to some degree, but by and large, property in the urban core is more expensive than in other parts of the valley.
Last year, land prices in prime areas of the valley sold for about $400,000 an acre, according to Home Builders Research. Downtown, real estate regularly sells for at least $1 million an acre.
The area has been highly priced for several years now as landowners, emboldened by redevelopment efforts that promise to make downtown thrive, put big values on their holdings, Focus Commercial Group broker Brandon Wiegand said.
Meanwhile, assembling enough land for a large project downtown can prove difficult. Many of the area’s vacant parcels are chopped up among several owners, so buyers might have to negotiate with five or six parties to get a chunk of property.
One potentially lucrative development option is housing, which brokers say is sorely needed to lure more workers and residents downtown. But home sales and rental prices aren’t high enough in the neighborhood to make a condo or apartment tower profitable.
“You can’t find enough land at the right number to make it (work),” Wiegand said.
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When Ken McCown, director of UNLV’s Downtown Design Center, interviewed for his job in spring 2012, he was “mortified and excited” by downtown’s vacant land.
He described downtowns as smiles that have teeth missing when buildings get knocked down. In some areas of Las Vegas, especially far east on Fremont Street, only a few teeth remain.
“It really becomes pretty grim,” McCown said.
But the empty space also leaves opportunities to create something new.
McCown said he plans to work with the Downtown Project to design a light-industrial district for, say, 3-D printing companies or electronic manufacturers that could set up shop on undeveloped parcels or in existing warehouses.
“For a city of this size, you don’t (normally) see this much vacant land,” he said. “It’s a real, tremendous opportunity for Las Vegas to reinvent itself.”