Road to recovery for Las Vegas office market ‘will be a long one’

Steve Marcus

Empty space: This office building at the northwest corner of Rainbow Boulevard and Interstate 215 was constructed by Plise Development. It is shown vacant in June 2009.

Las Vegas’ commercial real estate market is poised for little improvement, with high vacancy rates, a dip in asking rents and minimal construction.

The valley’s office-vacancy rate will inch downward but remain high at 25 percent at year’s end, according to a report out Wednesday from brokerage firm Marcus & Millichap. Asking rents are expected to drop by 0.6 percent this year to an average of $23.80 per square foot.

Moreover, construction will remain “minimal for at least the next few years” as the region deals with widespread vacancies and a shaky employment outlook, the firm said.

Staffing levels are expected to rise by 1.2 percent — a total of 12,000 positions — this year. However, office-using sectors will account for only 1,800 of those jobs, according to Marcus & Millichap.

As Las Vegas’ economy expands with more tourists and conventions, the local office sector could see “modest” improvements. In addition, the improved housing market should “directly translate” into rising demand for office space from mortgage and other finance companies.

“Still,” the report said, “the road to an office market recovery in Las Vegas will be a long one.”

The forecast comes as a well-known landlord prepares to sell its 32-building office portfolio in northwest Las Vegas, a deal that would be the largest in years and provide a boost to the market.

Chicago-based General Growth Properties is trying to sell the buildings, and the company could fetch a sales price of up to $127 million, according to several Las Vegas brokers.

A deal hasn’t been finalized, but sources say the likely buyers are Houston-based real estate giant Hines Interests LP and Los Angeles-based investment firm Oaktree Capital Management LP.

A sale could close as early as this month, two people knowledgeable about the deal said.

About half of the office space reportedly is vacant, and it’s unclear how, or if, Hines and Oaktree will fill it with tenants.

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