Everyone knows about the huge casino and hotel projects being built on the famed Las Vegas Strip, but Sin City’s contractors, distributors, reps and manufacturers have hit a jackpot of new construction work that’s paying off in luxury condo projects located not only on the hotel-casino strip but also into the far reaches of the Las Vegas valley.
While residential construction has cooled down from the surge of new home-building that made Las Vegas one of the nation’s busiest housing markets during the past decade, compared to almost any other metropolitan area in the United States, the residential market is still sizzling. New home and luxury condo construction has kept electrical reps and distributors very busy.
“The electrical market here is on fire,” said John DeFazio, principal of Electric Sales Unlimited, a manufacturers’ rep based in Santa Fe Springs, Calif. “It has been for some time, and I don’t see it slowing down at all for a while.”
DeFazio, a Las Vegas resident living approximately 10 miles from the Las Vegas Strip, said he always figured if half of the proposed luxury condo projects were ever built, the market would “be on fire for a long time.” “It looks like if everything goes according to plan, even with delays, the Las Vegas electrical economy won’t even be able to take a breath until 2010,” he says.
DeFazio believes a conservative estimate for the market for electrical products in Las Vegas through electrical distribution is $450 million to $600 million a year. This estimate is in the same ballpark as the forecast for the Las Vegas metropolitan statistical area (MSA) developed by DISC Corp., Orange, Conn. Herm Isenstein, DISC’s president, says electrical distributors in the Las Vegas MSA will sell $520 million in electrical products this year.
Don Kaminski of Allied Group Sales Inc., a manufacturers’ rep based in Phoenix with a location in Las Vegas, said a key reason for the continuing growth in the residential market is that people are discovering many of Las Vegas’ suburbs offer reasonable housing prices compared to many other major metropolitan areas. “People are finding that there is a world outside of the Strip that’s very similar to where they’re from anywhere in the United States,” he said. “People are realizing suburbs such as Henderson, Summerlin and Red Rock offer very nice resort living areas and reasonable prices compared to a lot of markets.”
Steve Smith, president of Desert States Electrical Sales, a manufacturers’ rep based in Phoenix, doesn’t see any slowdown in Las Vegas construction in the foreseeable future. “Las Vegas will be outstanding in the next couple years,” he said. “It will be a good year this year, but the year they’re really looking to be huge will be 2007 because of these condo towers, the CityCenter project, and the infrastructure they’re having to build there.”
“It’s just a very vibrant economy,” agreed Bud Ruzycki, Electrical Development Group Ltd., a manufacturers’ rep based in Phoenix.
Brian Gordon, a principal at Applied Analysis, a Las Vegas consulting firm, said 103 condo projects are on the drawing boards in the greater Las Vegas market, representing more than 62,600 units. Of those projects, about 23 jobs — with about 15,600 units — are under construction. Approximately two-thirds of the projects are located within the “Resort Corridor,” an area within a mile of the Las Vegas Strip. The remaining one-third of the condo projects are located in the “South Strip” area, and in suburbs with traditional residential housing, and master-planned communities. These projects start at about $200,000-to-$300,000 per unit and go up to $5 million per unit, he said.
One of the larger luxury condo projects now being built is Trump Tower; several others are affiliated with well-known casinos. Gordon of Applied Analysis says the pace of presales activity for these condos is starting to slow down from where it was 12 to 18 months ago, and that some of the projects are being redesigned to fit current market conditions.
The biggest construction project currently underway in Las Vegas is Project CityCenter, an $8-billion-project being built by MGM Grand. According to a report in the Las Vegas Review-Journal, the first phase of the 66-acre development will include a 4,000-room hotel and casino, three 400-room boutique hotels, 1,650 luxury condominium-hotel units and 550,000 square feet of retail, dining and entertainment space. The project is expected to create 7,000 construction jobs. Marc Winard, president of NEDCO, a Las Vegas-based electrical distributor, said several other construction projects will be of the same magnitude as the Project CityCenter. He says the high-end of the residential market, where homes can easily cost $3 million, is also booming.
While the outlook for the Las Vegas construction scene almost looks too good to be true, with such rapid growth come huge challenges. High labor and material costs are causing developers to scramble to get their projects out of the ground first. Builders have canceled at least five buildings in the last year because they can’t afford to build them today at the same price that they bid them a year ago.
Some developers have reported a 30 percent increase in the cost of labor and materials in the last year alone. In the electrical market, electricians are in short supply. “There are not enough union or nonunion electricians to do this work, not even close, ” says DeFazio.
If a building was sold a year ago at $500,000, it cannot be built today for that because of the rising prices of everything that goes into those buildings, said DeFazio. He says there have been dramatic increases in copper, plastic, and steel. “The builder cannot really turn a real profit today based on what he sold it for a year ago.”