Construction activity in Las Vegas remains brisk, industry sources said, and provides evidence the nonresidential construction sector could weather looming economic headwinds better than others due to its longer planning and funding timelines.
Demand for major projects remains strong across the board, especially in entertainment type uses, said Brian Riffel, executive vice president in the Las Vegas office of commercial real estate brokerage firm Colliers. That’s a sign of strong optimism, despite recession concerns ringing alarms across the country.
For example, Toronto-based Colliers just brokered a $240 million, 40-acre land deal for a Formula 1 development on the Strip. Other significant entertainment projects underway in Las Vegas include a $3 billion Oak View Group entertainment development, as well as the MSG Sphere.
A post-COVID bounce
The gaming and entertainment industry in Vegas has experienced a robust recovery over the past several months, Riffel said.
The bounce comes off pandemic lows and the end of widespread stay-at-home mandates across the country, Riffel said. Earlier this month, the Biden administration also dropped COVID testing requirements for foreign travelers, which should benefit international travel.
Cory Sylvester, principal at Albuquerque, New Mexico-based self-storage developer DXD Capital, echoed Riffel's positive outlook on the commercial side of the Las Vegas construction market as well.
"From our perspective, we have not slowed down," Sylvester said. "The market in Vegas is definitely still very hot.”
For example, DXD recently broke ground on a 1,100-unit self-storage facility located on a 1.7 acre parcel at the corner of West Sahara and South Monte Cristo Way in Las Vegas.
DXD acquired the property in January 2021 through its DXD Self Storage Fund I, which launched in November 2020. That shows how commercial development projects can maintain momentum even as current investing slows.
"We’ve continued to plan projects [in Las Vegas] throughout the pandemic,” said Sylvester.
Consumer slowdown in the works
With a third interest rate increase last week, signs of a consumer spending plunge are already beginning to creep up in the economy. Spending on services like travel and dining out has slowed to half its pace from earlier this year, according to The Washington Post.
“If tourism declines, you see overall economic activity can be impacted,” Sylvester said. Despite that reality, he added "there’s certainly a lot of money that’s betting that Vegas is going to continue to do just fine.”
Whether the Las Vegas market can maintain that boom is yet to be seen, however, and hard to predict.
The Great Recession hit Las Vegas hard. Nevada had the most bankruptcy filings of any state in the country in 2009 and 2010, according to the American Bankruptcy Institute.
But Dustin Alvino, senior vice president of investments at commercial real estate brokerage Marcus & Millichap, said Las Vegas is much better positioned this time around as a home to both NFL and NHL franchises, in addition to the upcoming Formula 1 project.
He added that he expects tourism levels in Las Vegas to remain strong, and that there should not be a mass withdrawal of institutional money in case of a downturn.
“Since the Great Recession, Vegas has done a fantastic job. They’ve made significant investments in financial services, healthcare, technology,” said Alvino. “You’ve seen a fairly large exodus from California into Las Vegas. The future looks bright for Las Vegas in my opinion.”