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Valley land prices fall during quarter, may decline further
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CRAIG L. MORAN/LAS VEGAS REVIEW-JOURNAL
Ken Brazil on Wednesday stands by the Pit Stop at 1420 Paseo Verde Parkway, one of six Pit Stops he owns valleywide. An observer said gasoline station and convenience store operators are looking for chances to buy land that has become cheaper during the recession. » Buy this photo
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LAS VEGAS REVIEW-JOURNAL
Land prices continued to slide in the third quarter and further reductions are expected through the end of the year as more property goes back to the bank, a real estate analyst for Colliers International brokerage in Las Vegas said.
Many highly leveraged parcels have reverted to lenders who are aggressively pricing the land to sell and get the loans off their books, Colliers research director John Stater said.
The average price for residential land is now $130,000 an acre, though some builders made purchases between $175,000 and $200,000 an acre in Summerlin South, Mountain's Edge and Henderson, Colliers reported.
Current values along the resort corridor remain difficult to pinpoint, with just one comparable sale during the quarter -- a 2.15-acre parcel at Las Ve-gas Boulevard and Harmon Avenue that sold for $25 million.
Demand for resort corridor land remained low and was not from traditional developers and gaming operators, Stater said. It's characterized by long-term investment plays or speculative bottom-feeders who can hold the land for future development.
Gone are the days when end-use land buyers were willing to pay $30 a square foot in Las Vegas, said Ron Opfer, commercial-assets director at Coldwell Banker Premier Realty. Their target today seldom reaches $10 a foot.
"Their motivation is clearly to purchase land at prices that will sustain the new economy of less consumer spending," Opfer said. "I'm tired of looking backward at what was normal. The clients I work with all tell me that this is the new normal. None of these business owners are saying, 'When will we get back to normal?' This is the new normal and they've already adjusted to it. There are no robust profits, just operations that are surviving."
Ken Brazil, owner of six Pit Stop convenience stores and gasoline stations around the valley, has cut spending, laid off staff, renegotiated vendor contracts and streamlined operations so that he's now running in the black. He revised his business plan to take into account lower volumes for fuel sales, slot revenue, car washes and merchandise sales.
With declining land values and historically low interest rates, the cost of developing a convenience store and car wash has dropped dramatically from three years ago, Brazil said. He wants to open four new stores in the next two to three years without adding to management overhead.
"I think we're probably close to the bottom," he said at his Green Valley Pit Stop. "If this is the basement, how are we going to survive? The need for a certain volume has gone down, so we have a pro forma more reflective of where we are right now and there are still opportunities out there for my particular use."
Gasoline station and convenience store operators are looking to gain a stronger hold in Las Vegas during the economic downturn, Opfer said.
Utah-based Maverick Oil is about to close escrow on land near Blue Diamond Road and Decatur Boulevard, the company's first venture into Las Vegas. Vallero Oil plans to open more outlets in Las Vegas. Arco and 7-Eleven are also looking to expand.
Dave Johnson, senior vice president of retail for NAI Las Vegas, said he's seeing more corner parcels available for commercial development. Values have dropped to $18 to $20 a square foot from $30 a square foot in 2005 through 2007, he said. Among his clients looking for land in Las Vegas are CVS Pharmacy, Chase Bank and WinCo Foods.
Lower commercial real estate values offer one of the few upsides for small-business owners as the U.S. economy recovers from the Great Recession.
Despite these conditions, only 6 percent have purchased one or more properties over the past two years, while a majority (52 percent) hasn't even thought about making an acquisition, a study of 300 small businesses released by CIT Group shows. Slightly more than a quarter (28 percent) believe that buying real estate today presents a "great" or "substantial" opportunity.
Colliers research analyst Stater said it's "staggering" to compare this year's land transactions and values with the boom years of 2004 through 2006. Clark County had just $362 million in land sales covering 2,853 acres through the third quarter, compared with $3.7 billion in sales and 18,000 acres in 2004, he reported.
Colliers land broker Scott Gragson remembers when "money was easy." He could get private financing on a 10-year note with reasonable interest and 20 percent to 30 percent down.
Gragson said the problem started when he went to the bank. He said he fell victim to his own game and is now trying to work out loans on land that has lost significant value and is not likely to be developed for three to five years.
"If they want to crush you, they can crush you," Gragson said. "I say, 'Let me live.' Early on they were taking the property. They wouldn't extend the note even though I still had equity. These were big loans, $4 million. We're working it out. I won't have any money, but we're working it out. You've got to deal with it and move on. Who's the buyer for vacant land right now?"
Gragson said he closed his last significant land sale at the end of 2007.
"We saw the signs. The velocity just stopped. It was like musical chairs -- when the music stopped, you stayed where you were," he said. "It's all about do you have to sell and when. Therein lies the pressure. I wouldn't sell today if I didn't have to."
Contact reporter Hubble Smith at hsmith@reviewjournal.com or 702-383-0491.
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54 degrees K.b 54!
http://alturl.com/otcmn -- RJ, where is the story?
Reality Bites - you realize k.b. was joking about his rain comment, right?
Vegas was built on tourism and the snow birds. Maybe Reid can 'man up' to diversify our economy in enticing more of these kind of people to a city that offers 24-7 entertainment, restaurants galore, and beautiful winter weather. Who wants to retire in rain everyday, k.b.? Not me.
What I don't understand is why all you doomers don't leave? Go to Seattle, just looked at the weather report, 50 degrees overcast with rain for the next 365 days. You'll love it!
The paper should have interviewed the National Realtors Association. The NRA would have said,"we have reached the bottom and the market is about to rebound. Prices and sales will rise significantly over the next year!"
This is what they've been saying for 5 years. Why change now?
Thank you President Bush for deregulating the mortgage industry. The story you read above is what happens when government doesn't mind the store.
Rip-off artists take over and write the rules and we the taxpayers are stuck with the misery and bill.
and, if the massive amount of water being sucked from lake mead through those huge tunnels is ever stopped so colorado river water can be distributed for farming rather than building @*#&*! casinos, i'll be ready to buy las vegas property for $2 an acre. never saw such a building frenzy as what's been going on in las vegas area for past ten years - all because of the tunnels to the bottom of lake mead. i hate casinos and the building frenzy for what they've done to what was a great recreational area and water storage system. drought, my hindquarters~~~~
THE LAKE IS DROPPING LIKE A ROCK AND FOLKS ARE TALKING MAJOR RECOVERY.........................
IF THE RE-ROACHES COME BACK INTO THE VALLEY.....
WERE ALL DONE FOR......KEEP YOUR MONEY KEN
No help to upside-dowm "PRIME" borrowers still paying despite being blown up when Subprimers walked away (after living for free for two years or more), causing more and more Prime borrowers to thrown in the towel.