Given this opportunity to write about commercial property management, I have to admit my first thoughts were about the daily challenges we deal with in this rapidly changing field.
As a longtime property manager and this year’s president of the Commercial Alliance Las Vegas (CALV), these challenges are usually hot topics of conversation.
At the same time, we can point to plenty of positive developments that benefit the profession—as well as the overall commercial real estate industry and the Southern Nevada economy.
Let’s start with some of the challenges.
There’s no denying the office sector has been facing some tough times. With interest rates rising and so many office workers around the country still working from home, vacancy rates soared during the pandemic and remain relatively high. National and industry media outlets have been quick to cover instances where once-bustling office parks and buildings have been facing foreclosure or otherwise dealing with distress.
Many tenants are looking to downsize or opting not to renew their lease, often because they don’t need as much office space as they did before the pandemic. A good amount of sub-lease space has also hit the market. Other office tenants are consolidating multiple offices into one location in each city where they do business.
Fortunately for us, Las Vegas has not been hit as hard as most other big cities. For proof, consider some of the new state-of-the-art office and mixed-use developments being built in high-profile suburban locations such as Summerlin and in the booming southwest part of town along the 215 Beltway.
Still, we have seen some recent examples of distress, including the once-thriving office park near Paradise and Flamingo roads known for years as Hughes Center, where Blackstone recently allowed the property to go into default amid increasing vacancy rates.
Another challenge for commercial property managers (and hotels) is that Nevada is now enforcing a code change requiring costly upgrades to elevators. Of course, this has a bigger impact on the office sector, since elevators are more common in office buildings than in retail or industrial buildings.
The law actually changed during the COVID-19 pandemic, though local officials are just now starting to actively enforce the code. The required upgrades can be very expensive for property owners. For example, I recently received a bid for about $37,000 to make the required elevator upgrades at a local office building I manage.
An extension can be requested, and if granted, building owners may be allowed to defer the work until the end of 2025. However, the work still needs to be done, and the costs continue to climb.
Combined with rising office vacancies and other challenges, these costs are increasingly hard to swallow.
While it’s not all doom and gloom in the industry, commercial property owners and managers are also spending more time dealing with issues related to homelessness, vandalism and theft at our properties. I recently saw a report estimating that homelessness increased locally by 16% from 2022 to 2023. While I’m not an expert on the topic, I can attest to the fact that we’re dealing with more and more costly incidents at our properties. This, in turn, leads to increased security measures and costs.
This is one of many reasons CALV and other leading local organizations for commercial real estate professionals have been supporting good causes like the Nevada Partnership for Homeless Youth. In fact, we recently organized an event where dozens of our members donated money and materials and volunteered to renovate residences that house homeless teens served by NPHY.
On another positive note, we continue to see plenty of bright spots in the local commercial real estate industry.
One recent example came in early September, with news about Prologis buying 879 acres of land at Apex on the outskirts of North Las Vegas. The company announced plans to build an 11 million-square-foot industrial development once it pays to bring the necessary utilities to the site. Construction is expected to start within the next three years and include multiple buildings.
After all, if there’s one thing we do well here in Southern Nevada, it’s build things that keep the local economy humming.
Natalie Allred is the 2023 president of the Commercial Alliance Las Vegas (CALV). She is also vice president of property management for American Nevada Company. Her professional designations include being a Certified Property Manager (CPM) and Accredited Residential Manager (ARM).
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This story originally appeared in Las Vegas Weekly.