No Slowdown in Sight for Las Vegas

by Tony Illia

Las Vegas is undergoing a building boom of epic proportions. Over $20 billion in gaming, hospitality and condominium construction is planned for the coming three years, while more than $3.5 billion in transportation construction is on tap. Can the city keep ahead of its growing population and steeply rising construction costs?

advertisement

Las Vegas is struggling to keep pace with an unprecedented building boom fueled by 7,000 new residents a month drawn to the region's affordable housing, low unemployment and steady job growth.

Southern Nevada's population is now at 1.75 million, and it's anticipated to reach 2.75 million by 2024, said Jeff Hardcastle, the state demographer.
Even today, local roads and highways are clogged with about 1.31 million cars and trucks daily. The Regional Transportation Commission estimates that for every 1,000 new residents, another 750 vehicles join the local roadway network.

Local voters approved a tax-backed initiative in 2002 for $2.6 billion in transportation improvements, including 425 mi. of high-speed vehicle lanes on local highways, 225 buses with seven new routes and synchronized traffic lights.

The Nevada Department of Transportation, meanwhile, approved a record $1 billion statewide road and highways construction program in September 2005, with roughly 47 percent of that money headed to Southern Nevada.
Projects include the $94.8 million U.S. Highway 95 widening between Valley View and Rainbow boulevards in Las Vegas. It's the largest single-road job in state history, according to Las Vegas Paving Corp., the Las Vegas-based general contractor.

Gaming, however, remains the region's economic engine, and there are currently $14.7 billion worth of resort expansions planned between 2006-09, according to the Las Vegas Convention and Visitors Authority. That includes 19,966 hotel rooms and 340,000 sq. ft. of added convention space.
Another $6.45 billion worth of tentative development is planned through 2009. Current mega-resort projects that are in planning or have broken ground include Steve Wynn's $1.8 billion, 2,000-room Encore at Wynn Las Vegas with general contractor Tutor-Saliba Corp., Sylmar, Calif.; Marnell Properties' $1.8 billion, 1,500-room M Resort with contractor Marnell Corrao Associates, Las Vegas; Starwood/Edge Resorts' $2.5 billion, 4,000-room W Las Vegas with contractor M.J. Dean Construction Co. of Las Vegas; and Ian Bruce Eichner's $1.8 billion, 3,000-room Cosmopolitan Resort & Casino which is currently under construction with contractor Perini Building Co., Phoenix.

But MGM Mirage Inc. tops them all with its Project CityCenter development. The $7 billion, 18-million-sq.-ft. hotel, condominium, casino and entertainment complex is the largest privately financed construction project in U.S. history, according to developers. The 76-acre complex is situated along the Las Vegas Strip between the Bellagio and Monte Carlo resorts.

Tishman Construction Corp. of New York is the construction manager, Perini Building Co. is the general contractor and Gensler of San Francisco is the executive architect. The project, which began major work this summer, is scheduled to open by November 2009.

The undertaking will see more than 7,200 workers at peak activity, or about one-third of Southern Nevada's total union construction workforce, said Dick Rizzo, Perini chairman. The company, in response, has been importing workers from out of state and paying up to 15 percent over scale wages as well as moving expenses in order to meet staffing needs.

Construction is now the second-fastest-growing employer in Las Vegas, trailing only the hospitality sector, according to the state Department of Employment, Training and Rehabilitation. The industry was responsible for 106,800 jobs in 2005, a 12.2 percent gain over the previous year.

But increased employment has also resulted in a crunch to fill the valley's demands for even more construction workers.

"There is a lot of work available, but we need to be selective about the jobs we pick," said Tony Dazzio, vice president of business development for Burke & Associates Inc. of Las Vegas. "We are trying to pace ourselves in the market and not get beyond what we can handle. We don't want to disappoint."

Land constraints and new residents are fueling a valleywide high-rise building boom. There were 135 proposed luxury high-rise condo projects totaling 91,934 units in the second quarter of this year, yet only 14.6 percent of those units were actually under construction, according to Applied Analysis, a Las Vegas-based business advisory firm.

About 6,900 units had suspended sales, while another 1,900 units had officially called it quits due to the cooling condo market. Others, however, are well under way, including MGM/Turnberry's $1.2 billion, 1,727-unit Signature at MGM Grand with general contractor Marnell Corrao Associates; Fifield's $190 million, 900-unit Allure Las Vegas, being constructed by Bovis Lend Lease; CityMark's $167 million, 341-unit Juhl with contractor Turner Construction Co., New York; and Executive Home Builders' $160 million, 340-unit One Queensridge Place, well underway with contractor Perini Building Co.

Rapid population growth is additionally fueling high amounts of commercial real estate activity, with 9.5 million sq. ft. of retail, office and industrial space under construction in the second quarter of this year, which is 40 percent more than a year ago, according to Restrepo Consulting Group, a Las Vegas-based real estate research firm. There was another 11.5 million sq. ft. of total commercial space planned for future development during the second quarter as well.

"There's activity across-the-board, but the real challenge is finding available land," said Sallie Doehbler, director of business development for United Construction Co., Reno. "Owners, however, are becoming more educated about the process with pricing and permitting, and they are seeking out contractors earlier in the process."

Longer than expected lead times have resulted in a glut of projects coming online simultaneously. Sacramento-based Panattoni Development Co., for example, will spend roughly $70 million this year building new projects, totaling over 800,000 sq. ft. throughout the Las Vegas Valley.

"We're aggressive on the industrial market given the low vacancy rates and pent-up demand for space," said Jason Kuckler, Panattoni's development manager. "Construction and service companies are driving much of the demand for industrial buildings."

Meanwhile, an influx of seniors and baby boomers attracted to the area's warm climate and recreation activities have fueled demand for health-care facilities. It has resulted in projects like the new $100 million, 171-bed Centennial Hills Hospital and Medical Center in northwest Las Vegas. The project is being built by Layton Construction Co. of Sandy, Utah. SR Construction of Las Vegas is the construction manager.

The eight-story, 354,000-sq.-ft. building at 6900 North Durango Drive is scheduled to open in 2007.

Phoenix-based Kitchell Contractors finished the new $145 million, 141-bed St. Rose Dominican hospital in southwest Las Vegas in August. Designed by HKS Inc., Dallas, the four-story, 388,711-sq.-ft. facility marks St. Rose Dominican's third full-service, acute care hospital in Southern Nevada.

"It seems like the medical office space is really heating up around lot of these big hospitals," said Greg Korte, president of general contractor the Korte Co.'s Las Vegas Division. "We'll see a record $60 million in volume this year, which is up about 12 percent from 2005. And that's after scaling back our growth."

Click here for Next Feature Story >>