Las Vegas Vacant Land Market Sept. 17, 2008 by Jennifer Peltier Through the second quarter of 2008 (latest available data at time of publication), the Las Vegas valley vacant land market reported record-low sales volumes. In addition to a reduction in the number of acres changing hands, the average price per acre was also on the decline. During the quarter, approximately 223.2 acres were sold, which represented a decrease from the 252.1 acres reported in the preceding quarter (Q1 2008), and was 58.0 percent below the 531.2 acres sold in the same quarter of the prior year (Q2 2007). The reduced volume of activity reflects impacts associated with a slowdown in the residential market and concerns regarding the overall economic climate. Besides the resort corridor, the southeast and developing northwest reported the largest shares of land changing hands. Average market pricing remained volatile with resort property transactions continuing to impact the market-wide average. Excluding 66.5 acres of premium-priced resort properties that sold during the quarter, a total of 156.7 acres sold at an average price per acre of $570,300. The latest price point represented a 4.8-percent decrease from the preceding quarter and a 20.6-percent decline from the same quarter one year ago. Pricing declines reflect current economics, which are impacted by a challenging housing market, stricter lending practices, escalating commercial vacancies and increasing foreclosure activity.   Resort Property Pricing Premium While the non-resort land segment continued to pull back, a handful of premium-priced resort transactions were consummated. Approximately 58.9 acres transferred title for $751 million, or $12.8 million per acre, at the northeast corner of Harmon Avenue and Koval Lane, the former site of the W hotel-condominium project and failed Las Ramblas condominium project. Other resort corridor transactions included property located behind the Flamingo Hilton and Imperial Palace, a former condo project site on 3rd Street and a 1.8-acre parcel across from Mandalay Bay. Due to the reduced sales volumes, these higher-end transactions raised the overall average price per acre to $4.1 million or $93.83 per square foot, a price point not reflective of general land pricing. Market Expectations Given the current fundamentals in the market, speculative land sales have come to a near standstill. The limited number of sales transactions occurring during the second quarter reflects previously contracted sales and near-term development deals. This overall slowdown has come at a price, as average land pricing has declined to levels witnessed three years ago. This trend is likely to continue until price points limit downside risk and reflect improvements in end-user demand for residential and commercial products. Lending requirements will certainly impact liquidity within the sector and the viability of development projects. Additional downward pressure on pricing is possible as values could fall another 10 to 15 percent in the near future. As with any market, opportunities will emerge, including bail-outs on distressed deals and foreclosed property sales. Imbalances in the majority of real estate sectors, residential and commercial, have limited exit strategies for many property owners. Those with future development plans are now questioning the feasibility of their projects as vacancy rates are increasing, rent growth is essentially flat and consumer confidence levels are at one of their lowest points in history. Through the second quarter of 2008 (latest available data at time of publication), the Las Vegas valley vacant land market reported record-low sales volumes. In addition to a reduction in the number of acres changing hands, the average price per acre was also on the decline. During the quarter, approximately 223.2 acres were sold, which represented a decrease from the 252.1 acres reported in the preceding quarter (Q1 2008), and was 58.0 percent below the 531.2 acres sold in the same quarter of the prior year (Q2 2007). The reduced volume of activity reflects impacts associated with a slowdown in the residential market and concerns regarding the overall economic climate. Besides the resort corridor, the southeast and developing northwest reported the largest shares of land changing hands. Average market pricing remained volatile with resort property transactions continuing to impact the market-wide average. Excluding 66.5 acres of premium-priced resort properties that sold during the quarter, a total of 156.7 acres sold at an average price per acre of $570,300. The latest price point represented a 4.8-percent decrease from the preceding quarter and a 20.6-percent decline from the same quarter one year ago. Pricing declines reflect current economics, which are impacted by a challenging housing market, stricter lending practices, escalating commercial vacancies and increasing foreclosure activity.