Retail Market Heats Up in Las Vegas

The retail market is heating up in Las Vegas. CAI Investments has developed and sold two of the land parcels in its larger 3883 Flamingo Center mixed-use project in Las Vegas, which will include a hotel and apartment units in addition to retail and entertainment. The parcels traded to a Chick-Fil-A and Del Taco at respective cap rates of 3.7% and 4.1%. These yields exceeded the seller’s expectations.

This transaction met and exceeded expectations and it further proves that cap rates are strong in Las Vegas,” Chis Beavor, founder and CEO of CAI Investments, tells GlobeSt.com. “Our strategy to target the average investor and provide an opportunity to buy a trophy asset in a premier location.”

The developer has strategically broken up the land site into individual parcels to maximize value in response to rising demand. “Rather than selling the entire center as one parcel where the price would’ve been north of $30 million for the retail portion alone, which limits our potential buyers, our strategy from the beginning was to subdivide the development into several individual parcels,” says Beavor. “These individual parcels sell for $4 million to $10 million each and allow smaller individual buyers the opportunity to purchase. For instance, in a bulk sale with a lower price, there might only be 20 buyers for the entire center, however, there might be 1,000 buyers for a Del Taco with a purchase price of $4 million.”

Las Vegas has grown rapidly in the last two years, fueled by population growth, job growth and tourism. “Las Vegas is an international market and is adjacent to California, which would be considered one of the top 10 economies in the world if it were its own country,” says Beavor. “Unlike California, which is a high tax state, Nevada does not have an income tax.  Many residents in high tax states are looking to Nevada as a retirement location. This process not only requires them to move here physically, but to also move their income-producing property out of California and into Nevada.”

Travel to-and-from Asia has also helped to fuel investment activity in the market. Las Vegas has direct flights to from China, and many international travelers pass through the city. “With 50 million visitors coming annually to Las Vegas it is not difficult to convince an interested buyer to come view your property,” adds Beavor. “Las Vegas, and the entire state of Nevada, is booming. A significant part of the $130 billion technology-based global gaming industry is based out of Las Vegas. The Las Vegas technology sector is thriving, and its communities are rapidly improving with a professional sports team and world-class medical hospitals. Las Vegas, dollar for dollar, is still the best value as an international city.”