By dollar volume, Las Vegas ranks third nationally for distressed commercial real estate, falling behind only Manhattan and Los Angeles. When the figures are scaled to market size, however, Las Vegas comes in at the top.

The local hospitality sector, which registered a 24% drop in average daily room rate year to date, accounts for almost half of the distressed dollar volume marketwide. Troubled properties in this segment run the gamut, ranging from smaller motels and limited-service Extended Stay properties to mid-sized off-Strip hotels and major resort/casinos, such as Planet Hollywood. So far, banks have reclaimed or initiated foreclosure on just a handful of local hotels, all of which are relatively small, lower-quality properties that were built in the '70s or '80s.

Developments account for another sizable share of distress in the Las Vegas market, as the weak economy and severe tightening of credit markets stalled many projects. Within the local market, several condo and apartment projects failed in the wake of the housing collapse. In addition, a few large mixed-use developments, including the Fontainebleau project located near the north end of the Strip, came to a standstill when lenders cut funding. There have been a few offers to purchase the idled project at pennies on the dollar, but as of now, it remains mired in litigation.