When to invest in Las Vegas?
I tend to spend a great deal of time looking at development on the Strip. The reason for this is that this area provides such huge employment growth opportunity. Employment growth is what drives residential real estate development and pricing. With great positive employment growth of 4 to 5% you find an active appreciating residential real estate market. With all the development going on down on the Strip this translates into many new jobs and people looking for housing.
This mourning I found out that the 6 billion dollar Plaza Project scheduled for the site that the New Frontier once stood has been rumored to be postponed. This means that owners and guests at the Trump Hotel will be looking at a dirt lot with an unobstructed view of the Wynn property, a Trump luxury competitor. Trumps units have begun to close with its owners.
But on the same day Las Vegas County Commission gave final approval to the Plaza project. It may be true that construction could be postponed but give Elad Groups deep pockets it would be purly their decision to postpone and not due to commercial financing.
The number of Las Vegas visitors are off 10% in the last few months compared to the previous year. With all the sky cranes hovering above the strip the possibility of the postponement of the the Plaza sends a clear message to many of us in Las Vegas.
The Strip maybe over building in an economic downturn (recession) period in the U.S. We all know that the dollars that flow into our city are discretionary. The Las Vegas Visitors Bureau moved up an $11 million dollar advertising campaign to help boost visitor attendance. The target audience is less on U.S. visitor but more on the international market because of the weak dollar and better economies of many foreign countries.
It is also notable that Bruce Eichner developer of the massive Cosmopolitan project has been unable to finalize his bailout deal with Hyatt. Although Hyatt and another investor already have large capital investments in the project cost over runs may almost double its total from $2 billion to nearly $4 billion.
In the mean time Deutsche Bank has continued to guarantee payment to the contractor on the project to insure no work stoppages. Deutsche has also notified all involved that it is proceeding with foreclosure on the project.
This foreclosure notice is definitely a move to put pressure on all development Investors to decide if they will continue or loose their investment.
In the mean time approximately 80% of the first tower condo units have been sold with a non-refundable 20% deposit. If Deutsche repossess the project do they also take possession of the deposits? Are they required to honor the existing contracts with the condo Buyers? Can they keep the deposits and reset the sales price of the units to the Buyers? All this is yet to be revealed, but it is clear to me that the project will be finished. It is to far into the development to stop it even if it becomes an expensive white elephant. If Deutsche does foreclose it is clear who the most likely Buyer would be as MGM surrounds it with the Belagio and Project City Center. MGM will not overpay for the project and Deutsche will be picking up the difference.
In other happenings Goldman-Sachs finalized its purchase of the Stratospher, I would not be surprised if its plans may be a little slow in coming as its location will be affected more by slower tourism. It may very well hunker down and wait out this recession before announcing expansion plans.
The Sahara has gained approval for a new tower and remodeling plans from the Clark County Commission. Now it must find financing!
Fountainblue is well underway with erecting its steel and seems to be on schedule.
Echelon is quietly proceeding with construction of its $4 billion dollar complex on the old site of the Stardust.
Encore at the Wynn has topped of its project and its new sign is hung. It is scheduled to open in 2009.
Just west of the strip Palms recently opened its new Condo/Tel tower.
Planet Hollywood is under construction of its twin timeshare towers.
Caesars Palace is building an additional room tower on its project.
The newly opened Pallazo is building a condo/hotel tower on its site currently.
Further South on the strip the South Point Casino is building a new expansion on its resort.
The “M” at the extreme south end of the Strip is erecting steel for its new resort.
Also just off the Strip “Hard Rock” has begun its major expansion and remodel.
In other areas The Cannery East is finishing its steel erection on South Boulder Hwy.
The latest Stations Casino at Aliante is proceeding with its interior finishes.
On Fremont Street the Gold Nugget continues with its tower expansion.
The Moulin Rouge has gained approval from the City of Las Vegas for its new tower and casino on the old historic site. But now they must find financing!
It looks like for the most part if the project is not currently under construction it may be delayed until visitor numbers rise and financing becomes available. This could mean that many projects may be looking at start dates of 3 to 5 years beyond what they had planned. Some players in this mega game will not be able to hold the land that long while others will be eager to land bank anything that comes up especially at discounted prices.
All this translates into a more reasonable increase in new rooms on the Strip and a slowing of expansion for now.
So what does this mean for the guy buying a house in Las Vegas?
First off it means that job growth will not hit the unreasonable stratospheric heights of 6.5% or higher that some have predicted. Slower job growth translates into slower absorption of residential inventory. So if you are a Seller it could take longer to get to a point to sell your home.
In the past I have said that everything should turn around by 2010 and I still believe that to be true. But I believe job growth in 2010 will be 4 to 5% which is still a large increase. I still believe that prices will stabilize in late 2008 or early 2009 and start rising in late 2009. I have never been in favor of short term investments in real estate but I feel for those willing to buy and hold we are in an excellent market to make that deal. If your interested in buying a home here I have many tools that can help you determine if you are making the proper decision for your needs. Just give me a call.
For the Latest in Las Vegas real estate call Max at 702-334-2200. Or email me at:Max@MaxSellsVegas. com. Your comments and questions are welcome.