Today’s economic climate for developing new commercial office space is faced with some unique obstacles, primarily the perception that changing work habits, to include work from home, has made workspace no longer viable, combined with higher interest rates and tighter lending from traditional banks. The office market in Las Vegas, however, has shown and continues to show remarkable resilience and record demand for the right buildings in the right locations, despite the challenges and what you hear in the national news.
Our local market is robust, particularly for new, design-forward, well-located, walkable and mixed-use spaces. All recently completed projects have leased at record rental rates. The quality and size of the tenancies have significantly improved. Both signs of Las Vegas’ continued and growing appeal to professional users. For example, Narrative, a new building, developed by LaPour and G2 Capital, located along the Interstate 215, the Beltway, between Durango and Buffalo drives, offers 100,000 square feet of four-story, class A office space, with just six tenants leasing over 92 percent of that space. Each of those leases were signed within one year of the building’s completion. Leasing occurred before, during and after the pandemic. Narrative is not alone in this success. UnCommons and Downtown Summerlin are also examples of new, modern, well-located office space with incredible leasing velocity and economics, attracting quality, sizable, credit tenants.
In terms of lending and investment, the capital markets are not aligned with local tenant demands, causing an inability to finance new office building projects. This is quickly leading to an unhealthy environment where it is unlikely that there will be any new construction of office space in the foreseeable future for Las Vegas. Without new, modern, attractive space, Las Vegas will not continue to attract high-quality tenants and industries that we rely on to diversify our economy.
It is hard to discuss office space without acknowledging that we are witnessing the trend of hybrid work policies that include working remotely as an integral part of the business model. Although this will continue as policy for many businesses and corporations, office space is still vital to the majority of companies’ cultures. There is increasing importance placed on well-located, amenitized offices to enhance existing employee satisfaction, as well as recruit and retain new employees. Office space is not obsolete, and I predict that the return to office, whether full time or using a hybrid model will continue its climb. The old model of building giant towers has given way to smaller-scale, boutique buildings that emphasize convenience and ease of use and it is the hottest sector in office, today. As evidenced by the record absorption, the consistent requirements of users looking in the market are for these new, modern and well-located spaces.
Eventually the lending and investing communities will adjust to this trend and look on a more micro-regional scale rather than the macro-national scale, which does not speak accurately of the new Las Vegas office demands.
Jeff LaPour is the founder of LaPour Partners, a commercial real estate and hospitality development firm. For the past 20 years, he has led development ventures that include more than 7 million square feet of office, industrial and hospitality space on over 600 acres of land.
