Las Vegas Real Estate and Business News

February 06, 2006 at 8:17:41 PST
February 05, 2006
A taste of Manhattan
The recent condo boom could send Las Vegas urban living upward - and upscale
By Jennifer Shubinski
Las Vegas Sun

The city of perpetual makeover is about to go a little Manhattan. The little railroad town that became a casino center and then a sprawling suburbia is adding a dollop of upscale urban life with 16 high-rise condominium towers under construction and a promise of scores more on the way.

If the boom continues, and that could be a large "if," Las Vegas will slowly evolve into a city dotted with neighborhoods that bustle with street life, nightclubs, art galleries, restaurants - even urban grocery stores. In those areas, cars won't be king. Rockports will.

"It does represent a new way of living in the valley," said Scott Adams, business development director for Las Vegas, which is keenly interested in renewing its downtown core by adding high-rise residences. "It's not new in America. We're just catching up with the rest of the country in terms of a vertical lifestyle."

As Southern California built out, for example, residential towers popped up along the Wilshire Corridor and in Century City, Manhattan Beach and Santa Monica. Similar trends seem inevitable in the Las Vegas Valley, which is long on housing demand and short on land for new developments.

"We will see beautiful and amazing urban projects in multiple locations throughout Las Vegas," said Tim Sullivan, president of the San Diego-based Sullivan Group Real Estate Advisors.

Towers planned in the Las Vegas Strip corridor are getting the most attention at the moment and they will bear watching over the years. Condo residents will add a dimension never before present on the Strip: Wealthy homeowners who pay big property tax bills and, for those who live here permanently, have the right to vote. Will they want the same things as tourists and the casinos and other businesses whose preferences have always ruled?

Across the Las Vegas Valley, construction is under way that will add 5,875 high-rise units over the next two to three years. Experts say they see demand for up to 7,000 new units a year for the foreseeable future.

Even so, the valley's urbanization would be piecemeal and slow. A handful of the more than 105 proposed condo towers fell through last year, and an estimated 80 percent of the high-rise units sold so far have gone to investors or out-of-state buyers looking for second, third or even fourth homes, real estate experts say.

"Most of these people aren't going to live in these towers - they are real estate investments," said Robert Fielden, partner at RAFI Planning Architecture and Urban Design.

Year-round residents will likely trickle into those units only through resales.

· Of the 10 residential condominium towers under construction, three are expected to open this year: SoHo Lofts, Panorama Towers and Turnberry Place. One, Metropolis, has already opened. (For purposes of this article, under construction is defined as projects that have foundations and a building taking shape.)

The condo towers recently opened or under construction include:

· Allure Las Vegas, with the first of two 41-story buildings under construction. Chicago-based Fifield Cos. is the developer of the project taking shape on Sahara Avenue, just west of Las Vegas Boulevard.

· Metropolis, at Desert Inn and Paradise roads, was recently completed and people are moving in to the 71 condo units.

· Newport and SoHo Lofts by Sam Cherry. Both projects are downtown, with SoHo expected to open this spring with 120 condos.

· One Queensridge Place, two of a planned four buildings are under construction at Alta Drive and Rampart Boulevard. The project is the first high-rise project in the outlying areas of the Las Vegas Valley.

· Panorama Towers, the first two buildings, each 33 stories tall with 325 units, by Hallier Development LLC are under construction. Laurence Hallier has plans for two more towers on the site; the first tower is expected to open this summer.

· Turnberry Place, the last of four 40-story buildings, is under construction and is expected to be complete later this year.

· Turnberry Towers, the first of two buildings on Karen Avenue at Paradise will be 45 stories with 318 condo units.

Building is scheduled to begin this year on other towers, including Streamline in downtown and two in southwest Las Vegas, Curve and Spanish View, for which foundation work was scheduled to begin this weekend.

· Dozens upon dozens of others are in various stages of development, including some that undoubtedly will never be built.

"People still want to move to Las Vegas," said Alan Schachtman, Fifield senior vice president. "Look at where we are today versus 20 years ago. At one point it was just a place to gamble. Today it is so much more, it's really becoming a multicultural city.''

The residential condo projects being built throughout the valley will face their own set of dynamics within each submarket, real estate experts said. People who buy on the Strip instead of the suburbs or downtown will want different things that cater to their lifestyle.

"Buyers into One Queensridge Place are mostly locals and they don't want to be close to the Strip,'' Myrna Kingham, owner of Tower Realty Group, said of the project near Summerlin.

Those looking downtown want still another lifestyle: more traditional urban living.

The coming vertical landscape also includes three condo-hotels on or near the Strip, two of which are to open this year. Buyers can use their units at will, but also can put them in a rental pool that will operate like a hotel. The arrangement allows owners to make money through appreciation, realize possible tax benefits and have a place to stay when visiting.

Those towers are:

· Platinum, developed by Diversified Real Estate Group at the corner of Flaming and Koval roads, is expected to open in June with 255 units.

· The Residences at MGM Grand, a joint venture between MGM Grand and Turnberry Associates, with three 40-story three buildings under construction. The complex totals 1,726 units, the biggest condo-hotel project under way. The first tower is scheduled to open this spring.

· Trump International Hotel & Tower, on Fashion Show Drive and Las Vegas Boulevard, is under construction and is to open in 2008. It is the tallest of the three projects, at 64 stories, and features 1,282 units.

Similar towers are proposed for the Strip, including Hard Rock's $1.2 billion condo-hotel and residential project and the $1.8 billion Cosmopolitan, by real estate developer Ian Bruce Eichner, which will have a mix of condo-hotel units and hotel rooms.

Excavation work on the Cosmopolitan's subterranean parking garage is taking place. Construction of its first building is expected to start this year.

High-rise living is not altogether new to Las Vegas. The first high-rise condominiums were the Regency Towers, two 28-story condo towers, built more than 30 years ago at the Las Vegas Country Club.

In the late 1990s, two developers, Irwin Molasky of the Molasky Group of Cos. and Florida-based Turnberry Associates, wanted to build luxury high-rise condos - an idea others found foolish. "Everybody thought we were nuts and that it would be a big failure," said Bruce Weiner, Turnberry Associates president.

By 2001 Molasky had completed Park Towers and Turnberry opened its first tower at Turnberry Place. Today, Turnberry has three occupied condo towers, five more under construction and plans for more.

Las Vegas always has had residents near the Strip, but most were frontline casino workers in inexpensive apartments. The condo boom has sent land values skyrocketing in the Strip corridor, which ultimately is driving those low-cost apartments away and replacing them with luxury living.

The change is driven by many forces, beginning with the rising number of Americans who can afford second or third homes. Add to that the rising popularity of urban living, especially Baby Boomers who "are bored with suburbia and are much more attracted to going back to the city where the action is," Sullivan said. Many buyers are two-income couples nearing retirement.

They choose Las Vegas because of the Strip and the state's low taxes. Many are Californians flush with cash from selling their homes.

One other major factor is a combination of low interest rates and the attractiveness of real estate as an investment at a time of less-than-stellar performance by the stock market.

"The condo market is being viewed as a commodity like stock, but real estate based," said Richard Lee, vice president at First American Title Co.

"It speaks to what is going on with land speculation and real estate speculation throughout the valley," said David G. Schwartz, director of UNLV's Center for Gaming Research. "You can sell condos at $500 a square foot if you have an investor from Chicago who's used to paying those prices.

"For many of them, it is a place to put their money. Las Vegas real estate has made a lot of people a lot of money."

Of the 100 or more condominium projects proposed in the last 18 months, fewer than 20 are under way. But real estate experts said the construction rate is no indication of the strength of the market.

"There's demand for it, but not for 120,000 (units) immediately," Sullivan said.

The true depth of the market is hard to pinpoint, and early sales, reservations and contracts may be higher in the beginning because of an early buzz about the possibilities.

"We're looking for demand to continue to stabilize as projects move forward," Brian Gordon, principal at the research firm Applied Analysis said. "It is slowing down, there's no doubt about it."

Several factors have curbed the frenzy, including the collapse of plans for Aqua Blue, Liberty Tower, Krystal Sands and Ivana Tower. Also, as developers work to convert sales reservations to sales contracts, some investors are pulling out.

But developers point out that demand remains strong, if somewhat weaker. Developers with experience in other markets point out that selling out a high rise typically takes at least two years. Las Vegas has some projects sold out and being built in less time, which is rare.

Of course, the bloom could always come off the condo rows. Joel Kotkin, a California-based senior fellow at the New America Foundation think tank, says the key elements in Las Vegas will be whether the high rises are accompanied by essential retailers - grocery stores, dry cleaners, restaurants, shoe repair shops and others. If high-rise dwellers have to drive to suburbia for essentials, their lifestyle will suffer.

Also, he says, if vacancy rates fall with investors and out-of-town owners unable to rent their units as often as they wanted, prices will fall.

Kotkin also noted that unlike most other cities, the owners of condos near the Strip will not be working there - and living near the workplace is an important ingredient in other cities that have gone vertical.

In the view of Eugene Moehring, chairman of UNLV's history department and a specialist in urban history, "This is more like living in Disneyland, it's living in the middle of the spectacle. It's not going to be a real community."

But if the trend continues, the tax base will rise sharply, with the footprint for a single structure yielding vast new amounts of property taxes to pay for more police and fire protection, more schools and for other community needs - by residents who typically will have less need for those services by virtue of their age, family size or the short amount of time they stay in Las Vegas.

"These are high tax payers with a low demand of services - the city, county and state comes out ahead on these people," said Bill Thompson, professor of public administration at UNLV.

Las Vegas Fire & Rescue, already familiar with fighting fires in the valley's megaresorts and existing high rises, will be looking for ways to retool its capabilities and will have to consider new fire stations in urban areas, spokesman Tim Szymanski said.

Staffing patterns will have to change at Metro Police, spokesman Chris Jones said.

" Las Vegas is not known for its high rises, but it will be," he said.

As for changes at the ballot box, Las Vegans might want to cast an eye toward changes in a newly urbanized area of Los Angeles. The biggest swath of undeveloped land remaining in west Los Angeles is being turned into a high-density neighborhood - Playa Vista - while just a mile away, a trio of high-rise condo towers are popping up at Manhattan Beach.

The new housing is choking surface streets and stretching city services thin, which has made residents of surrounding communities hopping mad. In Las Vegas, a large percentage of the high-rise dwellers will be part time and retired - and those groups historically have tended to vote against bond issues to pay for libraries, schools, transportation and other needs of growing communities.

"They don't want to have their taxes on anything increased" because their luxury high rise "becomes less of a luxury item for them," Fielden said.

Not everyone, it seems, welcomes higher densities. Sometimes, not even those who helped create them.

Sun reporter Mark Hansel contributed to this report.

Jennifer Shubinski can be reached at 259-8832 or at js@lasvegassun.com.

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