Depth of recession portends lengthy recovery period

April 02, 2010 - Southern Nevada needs to capitalize on the strengths that have made it a world-class destination to get past the 13.8 percent unemployment rate and the record vacancies in the region’s residential, office, commercial and industrial real estate markets, an economics expert says.

Jake Joyce, a project manager for Las Vegas-based Applied Analysis, told the Better Business Bureau of Southern Nevada that the city is positioned to rebound from the recession, but it’s going to take a long time to recover because of the depth of the hole it’s in.

Joyce told the more than 300 people he has put his money where his mouth is on his optimism for Southern Nevada’s recovery — he said he would close on the purchase of his first home later this month.

“Recovery can’t be painted with a single brush or one letter of the alphabet, but I think we have the ability to capitalize on what we already have and what we’ve been so good at providing,” Joyce said. “We have 155,000 hotel rooms in Southern Nevada. We spent 15 to 20 years building those rooms. The next 15 to 20 years is going to be focused on filling them. And we’re going to do it better, we’re going to do it cheaper and we’re going to do the best we can by outpacing any other city in the United States.”

Joyce spent the first half of his presentation explaining the highs and lows of Southern Nevada’s economic development. Then, he explained why it would take longer to recover from the recession. The city’s worst previous recession lasted 16 months, ending in 1982. The current one is at 26 months and counting, he said.

Since November 2007, 144,000 people have lost their jobs locally. The median price of a home has plunged to $120,000 and 76 percent of local residents are underwater in their mortgages, he said. The price of an acre has fallen to an average of $237,000 and nine out of 10 purchases of vacant or raw land over the past six months have been though distressed sales and nontraditional transactions.

Commercial real estate vacancies are at an all-time high, with office vacancies at 23.7 percent, retail at 10.3 percent and industrial at 13 percent, Joyce said.

The high jobless rate is the big contributor to the real estate woes, and Joyce said it’s estimated that to bring the unemployment rate down to a more palatable 5.5 percent, 124,000 jobs would need to be created and 140,000 people would need to move here to fill some of the housing void. Such an increase would help solve the commercial vacancy problem as well.

And that’s where Joyce’s optimism about recovery kicks in.

Throughout history, the gaming industry has been resilient, Joyce said, and it should be able to capitalize on the strategy it employed a few years ago to focus not only on the casino side of the industry, but on the food and beverage, entertainment and lodging sides. That diversification, he said, enables the industry to generate revenue from multiple streams and not just blackjack tables, slot machines and sports books.

Joyce said he is a frequent visitor to MGM Mirage’s CityCenter and he has seen it get busier every time he goes.

Joyce said he is hopeful that Southern Nevada will improve the means of delivering tourists from Southern California.

“I’m not going to say whether our future economy is going to have a choo-choo train going to California or a high-speed maglev train going to California, but I think we have to improve the ability to provide more efficient ways for our tourists to come here,” he said.