As the retail real estate sector remains solid in Las Vegas for now and prepares for the holiday shopping season, the Retail Association of Nevada expects a 3 percent increase in sales to a record $6.4 billion.
That forecast is similar to one from the National Retail Federation that predicts holiday spending would increase 2.5 percent to 3.5 percent with consumers spending an average of $902 per person. Overall, nationwide holiday spending is forecasted to reach record spending levels, ranging from $979.5 to $989 billion.
A record 1.9 million Nevadans are projected to participate in post-Thanksgiving shopping this year, a 3.7 percent increase from 2023, according to RAN, based on projections from the National Retail Federation. Some 58 percent of consumers have taken advantage of early holiday promotions by completing 25 percent of their planned purchases.
Wells Fargo, meanwhile, said that in a year when sustained consumer spending propelled growth and helped the economy skirt a recession, holiday spending will increase 3.3 percent, nationally, for the holidays — weaker than in 2023 and down from the long-term average of 4.3 percent.
“This year’s projected $6.4 billion in holiday spending highlights the cautious optimism among Nevada’s consumers and strength of our retail industry,” said Bryan Wachter, senior vice president of the Retail Association of Nevada. “Retailers are well-prepared to meet demand with early deals and convenient shopping options, but we know consumers are still navigating economic uncertainties.”
Consumers are once again prioritizing holiday gift giving, with an average of $641 out of $902 budgeted specifically for gifts for friends and family — up from $620 last year, Wachter said.
To meet this rising demand, retailers are anticipating an earlier start to the holiday shopping season, preparing early deals and ensuring ample inventory for in-demand items, Wachter noted.
This year, 45 percent of consumers planned to begin shopping before November, an increase of 2 percent from last year, motivated by a desire to spread out budgets (59 percent), avoid last-minute stress (45 percent) and skip the crowds (42 percent), he said.
Shopping destinations remain largely consistent, with 57 percent planning to shop online, followed by department and grocery stores (46 percent), discount stores (45 percent) and clothing stores (31 percent).
For gift categories, consumers’ choices are similar to last year, Wachter added, with gift cards remaining the most popular (53 percent). Other top choices include clothing or accessories (49 percent), books, video games, other media (28 percent) and personal care or beauty items (25 percent).
Online shopping is set to reach 56 percent of all holiday purchases, with non store retail sales, including online transactions, at an all-time high, Wachter said.
RAN’s projections based on survey data from the National Retail Federation align with national trends, with over 183 million Americans planning to shop between Thanksgiving Day and Cyber Monday. Black Friday is anticipated to remain the most popular shopping day with 72 percent of respondents intending to shop. Additionally, over two-thirds of Black Friday shoppers plan to visit brick-and-mortar stores. Cyber Monday is expected to be the second most-active day, with 39 percent of consumers planning online purchases.
Key motivators for consumers shopping over the Thanksgiving weekend include competitive discounts, which were cited by 57 percent of shoppers, followed by tradition at 28 percent. Younger consumers, particularly those aged 18-24, exhibit the highest intent to shop, with 89 percent planning to participate, according to Prosper Insights and Analytics.
As of August 2024, Nevada’s non store retail sales totaled $6.6 billion over a trailing 12-month period, marking an 8.9 percent year-over-year increase.
The Retail Association of Nevada forecasts non store holiday sales could reach $1.4 billion, surpassing last year’s $1.3 billion record.
Wells Fargo reported that despite consumer momentum helping sustain the economic expansion this year through September, the retailers included in its holiday sales metric have seen the slowest year-to-date sales growth in seven years.
“While we’re expecting a more modest end to the year for retailers, the fact is consumers are spending more throughout the year instead of waiting for Christmas,” said Wells Fargo Senior Economist Tim Quinlan. “On that basis a soft finish to retail spending in 2024 need not set off major concerns about the sustainability of spending in 2025.”
At the start of 2024, it was not clear whether the country could avoid recession this year; and yet the economy has side-stepped forecasters’ worst fears as a soft landing continues to play out thanks largely to sustained consumer spending, Quinlan said.
“That said, the money that consumers have spent in recent years has diminished the health of the household sector somewhat,” Quinlan said. “Once flush with cash, households have largely spent their excess savings. And once unburdened by a mountain of consumer loans, households today carry 30 percent more revolving debt than they did just two Christmases ago. To foot the bill for this year’s holiday spending most families will need to rely on their paychecks. The good news is that while the labor market may be cooling, so far that cooling has been only incremental and relatively orderly.”
Disposable personal income growth is still supportive of a decent pace of spending but without ample cash and credit cards helping facilitate a holiday-related splurge, Quinlan said they expect households “will be on the hunt for value: this holiday season — an idea echoed by a number of retailers in recent quarterly earnings releases when discussing their forward guidance.
“There is also a missing tailwind this year,” Quinlan said. “Sales momentum is as modest as it has been in seven years. With already reported data for the first nine months of the year, we know that consumers are coming into this year’s holiday season in pretty average shape. Despite broad spending continuing at a robust clip, the retailers we include in our holiday sales measure have seen sales rise at the slowest pace on a year-to-date basis through September in seven years.
Nevada retailers are showing strong signs for now as the third quarter vacancy remained at 4 percent, the lowest retail vacancy rate in Southern Nevada in more than a decade.
Colliers Research Manager John Stater said that Southern Nevada’s retail market posted 16,472 square feet of net absorption in the third quarter of 2024, the third consecutive quarter of positive net absorption, but a significant decrease from the first half of 2024.
The third quarter of 2024 saw 11,695 square feet of retail completions, bringing year-to-date completions to 109,109 square feet. This was the fourth consecutive quarter of inventory expansion after inventory decreased by 170,896 square feet during the second quarter of 2023, according to Colliers.
A total of 55,570 square feet of retail space was scheduled for completion in the fourth quarter of 2024. These projects were 77.8 percent pre-leased. A total of 401,690 square feet of retail space was scheduled for completion over the next four quarters, Stater said.
Neighborhood centers in Las Vegas had the highest vacancy rate at 5.4 percent, while power centers and freestanding retail the lowest at 2.2 percent.
Among submarkets, Henderson, North Las Vegas, northwest, southwest and west central had vacancy rates below the valley average, while downtown, northeast and University East had above average vacancy.
The valley’s lowest vacancy rate was in the southwest at 2.3 percent and highest in downtown at 7.8 percent, Stater said.
While the retail sector looks good long term, Stater said he worries that Southern Nevada’s retail market looks like it is entering a down cycle after showing some signs of recovery after an unimpressive 2023. The retail market “held up remarkably well” during the lock-downs, and expanded afterwards at a steady clip, he noted.
“It could be that the realities of higher-than-desired inflation and maxed out credit cards are taking their toll on the market,” Stater said.
Stater said they anticipate the closure in early 2025 of several big box locations now occupied by discount retailers, which should send retail vacancy higher. Weakness in discount retailers may seem surprising in the light of a challenging economic environment for consumers, but it makes sense when you realize that price pressures are very impactful on such retailers, he added. He called it difficult to guess who will replace them as they exit big box and junior anchor spaces.
“The long term prospects for Southern Nevada’s retail market are good,” Stater said. “Recent weak quarters likely owe something to inflation, which now appears to be moderating, and possibly to irrational exuberance in the aftermath of the lock-downs. The valley’s population continues to grow, as does employment, and these factors should help smooth over the rough spots ahead.”
During the third quarter, absorption was highest for community centers at 55,039 square feet followed by power centers at 4,283 square feet and freestanding retail at 2,379 square feet. Net absorption was negative 18,248 square feet in strip centers and negative 26,981 square feet in neighborhood centers, Stater said.
Among submarkets, Henderson had the valley’s strongest net absorption at 149,875 square feet. It was followed by downtown Las Vegas at 563 square feet. All other submarkets suffered negative net absorption this quarter, the highest experienced in the northwest submarket at negative 49,227 square feet, Stater said.
The sub sectors most active in occupying retail space over the past four quarters were involved in miscellaneous retail (46.9 percent), eating and drinking places (9.9 percent), cannabis (6.1 percent), amusement and recreation (5.8 percent) and automotive services (4.4 percent), according to Colliers.
Local companies took 47.4 percent of the leased square footage tracked over the past four quarters, followed by companies from the Mid-Atlantic (29.2 percent) and Mountain West (7.9 percent), Stater said.