The Las Vegas development community faces a lot of challenges but has opportunities as 2025 kicks off.
Earlier this year, NAIOP Southern Nevada, the commercial real estate development organization, tackled a look ahead at 2025 at a breakfast program where development executives provided a canary in the coal mine take of what’s happening.
Megan McInerney, associate vice president of the office division at Colliers, moderated the program that featured Jeff LaPour, principal at LaPour, Jess Molasky, chief operating officer at Ovation Development and Stan Wasserkrug, principal at InterCapital Asset Management.
“2024 brought a lot of unique dynamics across the development sector and many challenges that a lot of developers face — labor and materials, capital, tenant demand and other hot topics that had developers questioning whether it was the right time to move forward with their projects or not,” McInerney said.
“However, closing out 2024 from a market fundamental perspective, industrial demand remained really strong despite an increase in product that we saw hit the market last year,” McInerney said. “Class A office developments are being leased up at premium lease rates. And retail development activity remains consistent and multiple sectors and tenant demand remains strong.”
LaPour said 2024 was a transitional year for his company by selling a lot of land when the market got heated following the pandemic. They had two industrial deals in Las Vegas in 2024, a year that was centered on entitlement and construction.
Molasky said his company finished 1,000 market-rate apartments in 2024 and cited how their units are being absorbed quickly by renters. Ovation also broke ground on 1,000 affordable apartment units.
“We’re able to build a product that was above what we were charging before but affordable to the workers in Las Vegas,” Molasky said. “We shifted a lot of our pipeline from market rate to affordable because the market economics just don’t make sense. It just doesn’t pencil even though we bought land in 2022 to 2023. We’ll deliver them toward the end of this year or early next year. I think 2025 will be interesting. We’re ready to build market-rate again, but we think the market economics should be there by the time we’re entitled and ready to build. We’re going to talk to people to raise equity. We have two great affordable projects we’re going to start in 2025, and we’re going to try to add one more to give us four projects under construction. We’ve got a busy couple of years ahead of us.”
Wasserkrug said their focus in 2024 and 2025 hasn’t changed much. The retail industry in Las Vegas thrived through COVID, and they’re optimistic about their expectations for 2025, 2026 and 2027. He said they have seven projects ongoing in Las Vegas and two in Phoenix.
“What I found over the last five years is that even though our material costs have gone up dramatically, they’re dropping a little bit,” Wasserkrug said. “Interest rates are high but the way we do our per formas is under the worst possible scenarios, which is going on right now. But it still works. We just finished a project, which was 5 acres with McDonald’s, AutoZone, 7-Eleven and Taco Bell. Those are the types of projects we are trying to focus on.”
Wasserkrug said he’s positive about “what’s coming up in the future because I don’t see any negativity. The city of North Las Vegas has been absolutely wonderful with us. We have an 11-acre project with retail in front and a Compass Health hospital in the middle and a mini storage on the back side of this at Tropical and Pecos.”
Wasserkrug said they haven’t had any push back from tenants and that his company is getting top rents. They’re doing a project in front of Boulevard Mall with 12,000 square feet in two pads.
McInerney said the market faced issues in 2024, such as high land prices and constraints and elevated construction costs but she added with the election in the past it seems like the market sentiment is “growing increasingly bullish.”
She asked what growth the developers are expecting in 2025.
LaPour said it depends on product type and location and described “the entire market as a game of confidence.” He added that confidence is up and from people he’s spoken to there’s “relief and optimism for 2025. There’s challenges for sure, but I think it will be a game of stabilization.There’s giant pipelines of industrial. I mean giant pipelines of industrial. Las Vegas has done a good job of turning it off with 4 million square feet under construction. I think you will see the absorption story play out a little bit. There’s broker bonuses offered on some industrial space and the first time in five years or longer. I think it will stabilize this year. You won’t see a lot of new starts. I think you would have to have a super compelling reason to start a new industrial deal today in any market, but it depends on product type and submarket. You will see rents falling a little bit and concessions up.
“The office market? Who knows,” LaPour said. “Tenant demand is there. That used to be all that it took. You can’t do that with an office building. Even with the builds that have been built, I’ve never seen this level of absorption in my lifetime leading up to 2024 with size of the tenant, their creditworthiness and length of the lease term, the rents they were paying and small tenant improvements they were accepting. I don’t think office is going to get built in Las Vegas for a long time unless it’s Howard Hughes (in Summerlin). For the time being, office is on hold.”
Molasky said people realize that Las Vegas is the land of opportunity whether it’s taxes or the ability to have an impact on the city and make their mark. They see it as a good place to live and do business and that has helped the apartment market.
Ovation’s portfolio is doing great with rents barely softening, Molasky said. With an undersupply of housing not only in Las Vegas but across the country, there’s a strong demand. He said he fears tariffs imposed and proposed by the federal government will increase the cost of housing and that there needs to be more workers to complete projects.
“I’m optimistic and hopeful that 2025 will be a great year, but I have some concerns,” Molasky said. “We’re not planning to break ground on market-rate units in 2025 but 2026 instead and continue to build affordable units in 2025.”
“There are some concerns for me when it comes to multi-family,” Molasky said. “If we can’t make it work, I’m worried about a global or at least a national inability to make housing work. Market-rate apartments are workforce housing. They can’t afford to buy a house and spend $3,500 in their mortgage, but they can afford $2,000 for a two-bedroom unit. There’s not enough for them to rent.”
