Jun 4th Issue
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Analysis - Jun 4th, 2008
 Las Vegas Vacant Land Market by Brian R. Gordon During the first quarter of 2008 (latest available data at time of publication), the Las Vegas valley vacant land market reported the lowest volume of sales activity in recent history. In addition to a reduction in the number of acres changing hands, market average pricing of non-resort properties posted a decline from the preceding quarter (Q4 2007) and the prior year (Q1 2007). The market reported 252 acres of vacant property sold during the first quarter of 2008, which represented a 71.6-percent decline from the 887 acres sold in the same quarter of the prior year. The reduced volume of activity reflects the impacts associated with a slowdown in the residential market, escalating commercial vacancies, concerns regarding pricing and the overall economic climate. Market average pricing remained volatile with resort property transactions continuing to impact the market-wide average. The average price of property that sold during the first quarter remained elevated at $1.6 million per acre, or $35.62 per square foot. Sales activity in the resort sector included a total of 74 acres, including a $100 million transaction for 8.48 acres along Convention Center Drive, just east of the Las Vegas Strip, which translates into an average price per acre of $11.8 million. Other resort property transactions included the sale of a 3.24-acre site of the former Sandhurst condominium project at Charleston Boulevard and Interstate 15, along with approximately 63 acres of resort-entitled acreage in the South Strip area. Excluding premium-priced resort property transactions, values averaged $598,700 per acre, or $13.74 PSF, which was down 24.6 percent from the prior year’s non-resort average. It is important to note the mix of properties sold impacts valley-wide averages on a quarter-by-quarter basis. Given the lag time between contracts and closings, the first quarter vacant land valuations reflect the impacts of the economic slowdown that was prevalent throughout most of 2007. While the mix of properties changing hands continues to impact valley-wide pricing averages, the latest data confirms our understanding of market conditions. As important as the decline in non-resort land pricing is, we are also monitoring the pace of sales activity closely. The number of properties being sold has reached a new low, which has the potential to place further downward pressure on pricing. The timing of the housing market correction will play a key role in future land pricing performances. Imbalances in the majority of real estate sectors, residential and commercial, have limited exit strategies for many property owners. Those with development plans are now questioning the feasibility of their projects as vacancy rates are increasing and rent growth is essentially flat. On the residential side, reduced sales prices and carrying costs on underperforming communities are shrinking profits. Although one quarter does not make a trend, these reductions are in line with our expectations. We do expect this correction to continue, and we will be keeping a close eye on the implications of land price reductions. 
Brian R. Gordon |