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Las Vegas sees high-end retail development boom

By Kevin Kenyon

LAS VEGAS -- While Las Vegas is widely known as the gambling and entertainment capital of the world, developers here are wagering that it can also become a hot spot for high-end fashion-oriented retail.

Buoyed by an influx of retirees and families, many lured from California by its low cost of living, master-planned communities and absence of personal income or inheritance taxes, Las Vegas has quickly become the fastest growing city in the United States, surpassing 1 million people last year, according to Outlet Retail Consultants Ltd., Baltimore.

This residential development boom, combined with the 30 million tourists who visit Las Vegas each year, has created a huge retail demand, experts say, making the city an attractive target for developers.

At the corner of Las Vegas Boulevard and Harmon Avenue, an area expected to fall in the middle of the redeveloped Strip, San Diego-based TrizecHahn Centers is building Desert Passage at Aladdin, a $210 million, 450,000-square-foot themed entertainment project featuring more than 150 upscale retailers. It is expected to open in fall 1999.

In partnership with Santa Monica, Calif.-based Gordon Group Holdings Ltd., TrizecHahn is also developing The Fashion Outlet of Las Vegas in Primm, Nev., 35 miles west of Las Vegas. The $75 million project will accommodate 100 high-end tenants, including DKNY, Giorgio Armani and Calvin Klein, and is expected to open in July.

Meanwhile, officials at The Rouse Co., Columbia, Md., are looking to double the size of Fashion Show Mall, which the company acquired last year from the Howard Hughes Corp., as well as strengthen the mall's focus on high-end retail. TrizecHahn, the original co-developer and former manager of Fashion Show, retains a 25% stake in the center.

Rouse also is working on a retail project in the fast-growing master-planned community of Summerlin, located in the northwest Las Vegas sub-market. The 1.2 million-square-foot center, which has not yet been named, will be a traditional mall with a "tilt toward upscale retailers," according to Rouse. The project is slated to open in 2001.

Forest City Commercial Management, Cleveland, which already operates the upscale Galleria at Sunset in Henderson, Nev., and Showcase on the Strip, recently signed an agreement to manage The Grand Canal Shoppes, the indoor retail center of The Venetian Casino Resort. (See story below.)

The 12 million-square-foot Venetian themed mixed-use complex, currently under construction on the site of the old Sands Hotel & Casino on the Strip, will feature 800,000 square feet of upscale retail. The first phase is scheduled for a spring 1999 opening.

These projects, observers say, are the direct result of the huge success of The Forum Shops at Caesars, the Roman-themed retail and entertainment complex that ranks as one of the nation's most successful retail centers in terms of sales per square foot.

Forum Shops, which debuted in 1992, is a joint development of Indianapolis-based Simon DeBartolo Group and Gordon Group Holdings. Simon officials say the center enjoys average annual sales per square foot of $1,200, dwarfing the industry average of $300 per square foot. Last August, a 283,000-square-foot expansion effectively doubled the size of the project, adding 35 new stores and two restaurants.

The Forum Shops' success with upscale fashion bodes well for Desert Passage at Aladdin, said Julie Lee, marketing director. TrizecHahn's experience with Fashion Show, which opened in 1981, should help too.

"Forum Shops has done a great job promoting high-end fashion, so we're just looking to expand upon that," she said.

Las Vegas is ripe for this kind of development, agreed John Ragland, vice president, director of research for Rouse. "It's safe to say that with us looking to double the size of Fashion Show, we think the market is actually underserved with respect to retail, and it's obvious that others out there feel the same way."

Larry Brocato, Rouse's vice president and senior development director, said the high amount of competition may benefit the market in the long run.

"In some ways we're in competition, but in a lot of ways we're not. As retail in Las Vegas gets stronger, then Las Vegas as a retail destination will become stronger," Mr. Brocato said. "We see ourselves, together with Forum Shops and some of the others coming on line, as creating a shopping destination."

With close to 30 million visitors a year, and a residential market which continues to grow, it's a safe bet that the Las Vegas market can absorb more retail. The only question will be, how much?

The answer, according to Charles Creigh, principal of Las Vegas-based Newmarket Commercial Real Estate Advisors, will be partly determined by the level of future residential growth. Newmarket is the Chain Links representative for Nevada.

"What we're seeing is that as long as people keep in-filling the market and moving to Las Vegas, which they are, and builders keep aggressively building, the retail opportunities will remain."

In some respects, competition for disposable dollars is already intense in Las Vegas, said Frank Volk, Newmarket's retail services representative.

A variety of attractions -- gambling, shopping and entertainment -- are jostling to capture the public's attention. For example, he said, the market's hottest venue -- Forum Shops -- experienced a 5% sales decrease when the New York-New York Hotel & Casino opened in 1996, even though this newcomer offered little in the way of retail.

"When people use their time as a commodity, you may lose those dollars because those people may go to the next hot venue," he noted.

Mr. Volk agreed that the new focus on upscale retail will shift Las Vegas' current association solely with gambling and entertainment.

"We as a market are attempting to emulate some of the major markets in the United States, and even the world, as far as high-end fashion-oriented retail is concerned," he explained. "In theory, we could have as many boutique-type shops as New York by the year 2000, 2001. We can grow that market in three to five years vs. the 50 it took to develop it there."