DEEP DIVE ON FIVE
Clark County Taxable Sales
Clark County taxable sales continue to climb. In July, the taxable sales were $2.90B, almost $250M higher than July 2013. This makes five straight months that taxable sales in the county have been at least $2.9B, the first such streak since March 2007-July 2007. Taxable sales have also exceeded $3B in four of the last eight months. Clark County has surpassed this mark only five times since August 2008. On the basis of a 12-month moving average, taxable sales in the county reached $2.94B in July, a 7.9% jump from the prior year. That brings us to November 2008 levels and closer to the December 2007 peak of $3.03B.
According to the Nevada Department of Taxation, the three sectors with the largest absolute growth during the July 2013-July 2014 period were “food services and drinking places” (+$48.7M, +7%), “merchant wholesalers, durable goods” (+$18.1M, +12%) and “rental and leasing services” (+$17.5M, +19%). The latest data provide further evidence that things are getting better in Southern Nevada
Job Growth & Real Gross Metro Product Growth
The US Bureau of Economic Analysis reported last month that the Las Vegas MSA’s real gross metropolitan product (“RGMP”) grew by 2.4% in 2013. This is the highest annual growth since 2006, when it was 3.4%. It is also the second year that Las Vegas has seen positive economic growth since the start of the Great Recession. On another note, RGMP outperformed job growth in 2013 (+1.3% growth) for the first time since 2005 While gross domestic product typically leads job growth, job growth is still lagging the growth of Southern Nevada’s economy. In fact, job growth is down from +1.8% in 2012. We hope to see job growth accelerate and close the gap with RGMP over the next year. The recession was extremely hard on the Valley and its residents, but with improving prospects and the concerted effort to diversify the local economy, the long, hard slog should lead to a stronger Las Vegas on the other side of the recovery.
Commercial Real Estate Vacancies
RCG and UNLV are about to release the full results of their third quarter commercial real estate surveys. The Valley saw improvement in all three sectors in Q3: industrial, speculative office (multi-tenant, for lease buildings) and anchored retail. The industrial market looks strong with the vacancy rate reaching 8.6%, under the 10% generally accepted stabilized rate, with an asking monthly rate of $0.60 per square foot (“psf”). We are now comfortable claiming that the industrial market is back, thanks to large growth in Warehouse/Distribution centers. Reaching stabilization and the significant amount of speculative industrial property under planning and construction provide that evidence.
The anchored retail market improved as well, down 0.5 percentage points to 11.0%. The anchored retail market is about four quarters from reaching the 10% stabilized vacancy rate, according to the RCG forecast. The retail market is in the midst of a comeback, but still somewhat volatile, as suggested by the fluctuating monthly asking rents, which decreased $0.05 this quarter to $1.22 psf. Maybe the most significant development of the quarter, the Valley’s spec office market is, at long last, showing early signs of an improving trend line. The vacancy rate has gone down four quarters in a row, reaching 21.4% for Q3, and the monthly asking rent has risen the last two quarters, reaching the highest figure since Q4, 2011 at $1.88 psf. This improvement is mainly driven by demand for Class B and Class C office space. Due to these improvements, RCG’s forecast for the speculative office market improved by almost a full year this quarter, showing that the office market is now 6.5 years from reaching a 10% vacancy rate.
The Las Vegas Convention and Visitors Authority (“LVCVA”) reported that 3.54M people visited Las Vegas in August 2014, a year-over-year improvement of 5.1%. This consistent growth in the face of a moderate recovery shows that Las Vegas is successfully attracting visitors in spite of altered, post-recession spending habits. On a 12-month moving average basis, visitor volume reached 3.40 million in August, another all-time high, well above the pre-recession peak of 3.27 million visitors in February 2008 and the previous peak in December 2012, at 3.31 million visitors. This month’s figure is also 2.6% higher than at the same time last year. Visitation trends continue to perform well.
Gross Gaming Revenue (Net of Baccarat)
For August, the Nevada Gaming Control Board reported gaming revenue (net of baccarat) at $607.8 million. We use the net of baccarat number, because it is more indicative of the spending of the average gambler. Gaming revenue continues to exhibit anemic growth in the post-recession landscape, in spite of booming visitation and a steadily increasing population. On a 12-month moving average basis, August grew 0.5% since the same time last year; however, it also decreased 0.2% since last month, in line with the barely visible growth we’ve been seeing. For now, there is nothing to suggest that the rate of growth will pick up anytime soon. With the resort industry repositioning itself as more of an entertainment destination, helping to fuel fast-growing taxable sales in Clark County, and increased competition in gaming from other states and changing demographic patterns in the US, we suspect that most new visitors are here to enjoy the newer, more socially-oriented amenities now being offered. On the other hand, baccarat win has increased an average of 12.5% year-over-year on a moving average basis over the last 12 month. So, it appears that the Las Vegas resort industry is successfully attracting wealthy players, especially from overseas, and Asia, in particular, where the game is very popular.