Territory Inc. is no stranger to the Las Vegas retail market. The locally-based developer has built more than three-million sf of shopping centers in the area and has another two-million sf in the pipeline. Much of Territory’s assets are grocery- and big-box-anchored, such as the one-million sf Centennial Center, which counts Circuit City, Petco and Wal-Mart as anchors. Nick Hannon, Territory’s senior vice president spoke to GlobeSt.com about the market in Las Vegas and the upcoming RECon convention.
GlobeSt.com: There are reports out there about difficulties in the Las Vegas retail market. Do you agree with that outlook?
Hannon: Not at all. There are several perspectives on that. One perspective would be to look at the data as to overall vacancy in the retail market of shopping centers in the Greater Las Vegas market. Depending on whose stats you pick, what side of town or what submarket you use, the best might be 4% to 6% vacant, and some parts of the markets are sub-3% and in the mid-2%. How can that be bad? That’s not some statistical imagination. The latest data supports that.
There’s another perspective. The brokers’ community has been perhaps lulled, or had a feeling of euphoria, for the last 36 months that is aberration to a longer market sense here in Las Vegas. Instead of the phone ringing 10 times a day, it rings four times a day. While as compared to the last three or four years business is way off, the brokers we work with are still getting four calls a day. If you’ve never lived through hard times, or even challenging times, times when you’ve had to push and procure – push marketing versus pull marketing where you responded – this would seem weird to you. Many of the people, if you look at the time when they’ve been through retail brokerage, a large portion of them have done it for the last five years. So it tends to feed on itself because of that.
The third reason is that we have anchored properties. We didn’t do one of those mid-block deals put together by a bunch of syndicators with no anchor tenant. We don’t do deals that aren’t anchored by the likes of Kohl’s, Target, Wal-Mart or Alberstsons. Those centers, while it’s not as easy as it was last year, continue to lease. In the last 30 days our company did 10 leases. If you annualize that, that’s 120 leases a year, and that’s just the small-shop space.
GlobeSt.com: Are you not feeling as much of a hit because a majority of your portfolio is necessity retail?
Hannon: Out stuff does not have that much discretionary purchasing. Yeah, the nail shop might be suffering, but in economically tough times, people value shop. Our properties tend to be more cache and less value. And we are a portfolio developer. We hold our properties. We try to do the right thing, with the best guess, in the long run.
And depending on who you ask, there are 140,000 or 150,000 jobs coming online within the next 18 months. Those people have to live somewhere. And those jobs aren’t in question, those jobs are happening.
GlobeSt.com: There are a lot of serious lifestyle center being built around the area. How will they fare?
Hannon: Some of those retailers are tucking in. They’re not moving forward and even closing some stores. That segment is a little more cautious. When the media has some information to get its teeth into, and they paint a bleak picture – and there is some data to hang on that, I don’t want to act like it’s not real – public companies will that opportunity to clean up their balance sheets. It makes the downturn more intense. It’s self fulfilling. But when you have the upturn, it also gives you the liftoff. You’ve taken the problematic components of your enterprise, whether it’s bad units or concepts, when you go into liftoff, you’re a solid core business. Some people say it’s comparable to what’s going on with 9/11 during the airline industry.
GlobeSt.com: Do you think the downturn will impact all of the retail that is coming online on the Strip?
Hannon: That’s not our kind of property, but if you let me speculate, I doubt that will get reeled in. We still have three million people coming in a month. This has become the entertainment, dining and shopping capital of the world. They keep coming, whether they’re coming from China, South America or Phoenix.
GlobeSt.com: What about the ICSC Convention? Will we have a different tone this year?
Hannon: I can’t really tell you how that’s going to turn out. I can tell you more in three weeks. I don’t know. Our team has 50 appointments with retailers; I don’t know how that will come out, though. I don’t know what will happen at those meetings.