This year Las Vegas provided a particularly appropriate backdrop for the annual ICSC Spring dealmaker extravaganza. If anybody in the real estate business needs a reminder that these are uncomfortable times this overextended desert market provides a wake-up call in spades.
A Dubaiesque building spree in the face of stalled demand suddenly hits the skids. Even in the best of times how many high rollers want to own condos along the strip? That scene may work for a few visits a year, but a regular diet of swarming tourists and eight lane traffic jams can get old pretty fast, except for a hardened few. Cheap land and housing attracted Californians wanting out of high prices and high taxes. Now housing values have tanked nearly 30%. As for all the new hotel rooms, when you hear sky's the limit talk about convention and tourist trends, you know developers are getting ahead of themselves. The tight economy comes at a very bad time for all those casino operators.
At least most other U.S. markets have avoided Las Vegas's development splurge. That will be their saving grace as cap rates continue to rise and values decline. Softening vacancy rates shouldn't increase dramatically even as demand slackens. This downturn should be relatively manageable.
Of course we have seen in recent weeks, how several high profile flippees in last year's Blackstone bacchanalia lost their shirts, paying and leveraging too much just before the game ended in lamentable credit crunch. Just like in Las Vegas, you have to know when to leave the tables. We're now beginning to find out who stayed too long.
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Jonathan D. Miller
A marketing communication strategist who turned to real estate analysis, Jonathan D. Miller is a foremost interpreter of 21st citistate futures – cities and suburbs alike – seen through the lens of lifestyles and market realities. For more than 20 years (1992-2013), Miller authored Emerging Trends in Real Estate, the leading commercial real estate industry outlook report, published annually by PricewaterhouseCoopers and the Urban Land Institute (ULI). He has lectures frequently on trends in real estate, including the future of America's major 24-hour urban centers and sprawling suburbs. He also has been author of ULI’s annual forecasts on infrastructure and its What’s Next? series of forecasts. On a weekly basis, he writes the Trendczar blog for GlobeStreet.com, the real estate news website. Outside his published forecasting work, Miller is a prominent communications/institutional investor-marketing strategist and partner in Miller Ryan LLC, helping corporate clients develop and execute branding and communications programs. He led the re-branding of GMAC Commercial Mortgage to Capmark Financial Group Inc. and he was part of the management team that helped build Equitable Real Estate Investment Management, Inc. (subsequently Lend Lease Real Estate Investments, Inc.) into the leading real estate advisor to pension funds and other real institutional investors. He joined the Equitable Life Assurance Society of the U.S. in 1981, moving to Equitable Real Estate in 1984 as head of Corporate/Marketing Communications. In the 1980's he managed relations for several of the country's most prominent real estate developments including New York's Trump Tower and the Equitable Center. Earlier in his career, Miller was a reporter for Gannett Newspapers. He is a member of the Citistates Group and a board member of NYC Outward Bound Schools and the Center for Employment Opportunities.
