Southern Nevada:

Commercial RE, Construction in Focus as Leaders Prepares for Economic Turns

Over the next few years, the commercial real estate market and construction activity in the Southern Nevada region will grow mildly. While the area’s business leaders are bracing for a possible recession, they know the current economic growth cycle may last longer than anyone expected.

That’s according to the most recent forecast hosted by the Southern Nevada Chapter of NAIOP Commercial Real Estate Development Association. The keynote speakers’ opinions spotlight intriguing viewpoints, trends and projections so your credit union can plan appropriately.

Southern Nevada
Presented on Jan. 23 at the “Forecast 2020: Southern Nevada Commercial Markets” conference:

It’s possible the economies of Southern Nevada and the United States could go well into 2023 without entering a recession, although most economists are preparing for a contraction well before that time. Recession or not, annual U.S. Gross Domestic Product (GDP) — the most widely used historic measurement of economic growth — will most likely remain in its historically low 2 – 2.3 percent yearly growth range during expansion periods going forward for the foreseeable future. Key takeaways for Southern Nevada and the entire nation include the following: 1) There are fault lines in the economy, but there have always been fault lines and they are always sources for concern (not necessarily immediate cause for worry); 2) Consumer spending is outweighing the drag from low-growth business investment, but it’s because job growth has not yet turned negative; 3) Continuing uncertainties about the “variable policy environment” and the increasingly “wait and see” attitudes surrounding the upcoming 2020 presidential and congressional elections are headwinds; and 4) Economic recession probabilities for 2020 are now vanishingly low, short of idiosyncratic events — “It’s time to move predictions to 2021” or beyond.

The Las Vegas metropolitan area’s commercial real estate market is still nothing compared to its annual activity experienced the early 2000s — however, mild growth will continue in the coming years. This growth will see various rates of tenant “absorption.” The local apartment market had 4.7 percent vacancy in 2020, which will rise to 5.5 percent by 2023 (it was nearly 11 percent in 2010) — and will average about the same amount of builds/completed units over the next few years compared to the prior few years (about 2,000 annually on average). The local office market had 23.5 percent vacancy in 2020, which will fall to 22 percent by 2023 (it was nearly 27 percent in 2010) — and will experience a slight uptick in builds/completed units over the next few years compared to the prior few years (about 200,000 square feet annually on average). The local retail market had 13.5 percent vacancy in 2020, which will drop to 12.5 percent by 2023 (it has remain at an elevated 12 – 13 percent range since 2009) — and will see a slight downshift in builds/completed units over the next few years compared to the prior few years (about 125,000 square feet annually on average).

The Las Vegas region ranks the lowest in current walkable urbanism (the percent of a metro area’s office, retail and multi-family rental in “walk-up” areas). Las Vegas has about 3.5 percent of walkable urbanism and is the lowest city on this type of scale (and also has the lowest metropolitan GDP per capita of only $45,000). Also on the low end of the scale is San Antonio, TX; Phoenix, AZ; and Orlando, FL (these others having slightly higher GDP per capita numbers). On the high end of the scale is New York, San Francisco/Bay Area, Boston, Denver, and Washington, D.C. (with GDP per capita ranging from $67,000 - $104,000). In between are all other large metropolitan cities across the United States.

View additional forecast trends in the economy, commercial real estate, and urbanism. Click here for the 2020 - 2023 economic outlook report by Victor Calanog, chief economist and senior vice president for the Moody's Analytics Real Estate Information Services Network (REIS) — entitled "Turning Points: What's Next for CRE Markets.” Or you can click here for the walkable urbanism outlook report by Greg Lindsay, director of applied research at NewCities Foundation and director of strategy at CoMotion LA — entitled "Cities As a Service.”

Southern Nevada’s Current State of Homeownership
A report published by the Brookings Institution tells readers that the Great Recession of 2007 to 2009 brought a painful reminder that homes are not guaranteed to increase in value — and in no place was this more apparent than Las Vegas, a region particularly hard hit by the foreclosure crisis. The report highlights the current state of housing affordability and homeownership in 2019 within the local region and discusses what these trends imply for financial security and wealth-building going forward.

Southern Nevada’s College and Economic Mobility
A report published through a partnership between the University of Nevada (Las Vegas) and The Brookings Institution shows that the Las Vegas region’s middle-class economic mobility through means of college education is much higher compared to other Mountain West region states. 

“Middle class workers were hit hardest by the recession (in Las Vegas),” the report states. “Most (Mountain West) colleges help middle class students move up the economic ladder, or at least protect them against downward mobility. But there are differences by institution in terms of both access rates for middle class students and their average outcomes. The Nevada universities are among the cluster of institutions within the Mountain West with higher mobility rates, with UNLV enrolling more students from the middle class.”

Southern NV Jobs, Indicators, Stats and Outlook
RCG Economics has released its latest Southern Nevada metrics/indicators data report (published in January). Additionally, the firm separately publishes its Nevada Jobs Flash Report (with December 2019 and January 2020’s to be posted soon).

Local Home Affordability Vs. Job Growth
The National Association of Realtors recently released a study (“Home Affordability Index Ranking and Payroll Job Growth") showing trends in how local housing affordability can contribute to slower local job growth by employers. View the data table for local metropolitan information in Nevada.

Local Migration and Population Change’s Impact
Within one of Harvard University Joint Center for Housing Studies' latest research endeavors — "Losing Residents but Still Growing” — you can understand how the components of population change differ by county, as well as exactly how each community is evolving and where people are drawn to when they move. As the county-by-county map shows, many large central metro counties are attracting numerous international migrants, while many nearby suburban areas (referred to as “large fringe metros”) are attracting sizable numbers of domestic migrants. Counties in many high-cost metropolitan areas are losing more domestic migrants than they are gaining. Indeed, of the 100 most populous US metros, four of the five with the highest rates of renter cost burdens also have negative domestic migration.

Southern Nevada Occupational/Industry Trends
Additionally, download Chmura Economics and Analytics’ latest Southern Nevada Economic Overview to see 10-year future trends in worker occupations, employment, wages, cost of living, and industries.

Southern Nevada ‘Employment Review’
The Las Vegas Global Economic Alliance (LVGEA) has released its “February 2020 Employment Review,” with facts, figures and trends.

Your Local Region’s GDP: 2001 - 2018
The U.S. Bureau of Economic Analysis has released an overview and history on "Local Area Gross Domestic Product from 2001 - 2018" for individual counties in Nevada and the entire nation. It includes highlights and trend breakdowns for large, medium and small-population size counties, as well as the U.S. dollar size of economies for each county. Tables and files are included for download and review.

County Income and Poverty Estimates
The U.S. Census Bureau has released its "Small Area Income and Poverty Estimates (SAIPE) Program", which gives single-year estimates of income and poverty for all counties in Nevada and the entire nation — as well as estimates of school-age children in poverty for all 13,000-plus school districts.

Nevada Forecast
The Nevada Economic Forum — a yearly public-private partnership mandated by the state government — released a 2018 long-term economic forecast and snapshot in its "Report to the Governor and the Legislature on Future State Revenues". This report provides guidance for the state’s biennial budget cycle. Besides commentary and data from experts on Nevada’s general fund, breakdown of revenue, and a review of local and state taxes, the report also covers the following areas: economic overview, growth projections, future indicators, and trends in the statewide and national labor force, wages, household income, housing, population, interest rates, inflation, jobs, consumer spending and more. 

Employer-Worker Coalition Launched
Last year, more than 40 public and private entities in the Northwest Nevada region recently formed the Career and Technical Education Messaging Coalition of Northern Nevada (CTE-MCNN). The coalition's goal is to match potential employees with the many job and certificate opportunities available in the “New Nevada.” 

CTE-MCNN has created a website, www.NewNevadaJobs.com, which provides students, college and school graduates, and job seekers one point of access to research “good, quality jobs and connect to training and job placement, while also allowing companies to brand to potential employees.” 

Demographic Profile and Projections: Clark County

  • Total population: 2.22 million (and will hit 2.5 million by 2025).
  • Working-age individuals (15 - 64 years old): 66 percent of total population in 2015 (and will fall to 63 percent by 2025).
  • Labor force (at least 16 years old who are working/looking for a job): 1.12 million out of 1.78 million adult population.
  • Labor force participation rate (adults who “want” to work): 63 percent (or 1.12 million individuals).
  • Unemployment rate: 3.5 percent (versus 3.8 in NV and 3.6 in U.S.)
  • Unemployed workers: 39,700.
  • Median household income: $57,100 as of 2019 (compared to $58,700 for NV and $62,000 for U.S.)
  • Poverty rate: 14.6 percent (versus 14.2 in NV and 13.1 in U.S.)
  • Education of population (age 25 years or older): 20 percent have a college degree; 29 percent some college; 25 percent high school diploma; and 26 percent no high school diploma.
  • Data as of November 2019 from the Nevada Department of Taxation; Nevada Demographer’s Office; Nevada Department of Employment, Training and Rehabilitation; Center for Business and Economic Research at the University of Nevada Las Vegas; Federal Reserve Bank of St. Louis; U.S. Bureau of Economic Analysis; and U.S. Census Bureau

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