Mesquite Nevada Commercial Real Esate Market Update December 2009

There are currently only 12 active commercial buildings listed in the Mesquite MLS, and only 18 commercial land parcels listed active for sale in the Mesquite MLS. Commercial real estate is listed and generalized into these two categories in the Mesquite MLS. I have focused on the improvements, not the vacant land and attempted to break it down for you by highest and best use. There are some properties that do fall into more than one category.

After a careful physical review it appears that there are closer to 30 buildings available for sale or lease, and 45 commercial land parcels for sale or with an option to lease with build to suit in some cases.

Business closings have been dramatic over the past twenty four months, in the neighborhood of 30 have closed and are gone, including a large casino, numerous restaurants, retail shops, builders, associated contractors, suppliers, title companies, and various other small businesses.

In general, in retail space the vacancy rates range from 100% to as little as 20% per complex, virtually none are 100% occupied. The overall vacancy rate in Mesquite for retail space appears to be running between 40 to 50% of available space. There are between 50 and 70 vacant retail spaces, depending on space size. A vacant 8000 square foot building could count as one space or four units. I would guess there is between 100,000 and 120,000 square feet of idle retail space in the market.

Light industrial space may be worse than retail space in terms of vacancy rates, at least nine buildings are 100% vacant with close to 125,000 square feet of idle space. Then there are another ten to twelve buildings with some vacancy. My best guess is these have another 30,000 to 50,000 feet of idle unoccupied space. There may be as much as 175,000 square feet of vacant light industrial space.

Falcon Mesa Business Park Complex, this complex is a combination of office and retail multi purpose use. Seven of 13 of the total buildings appear to be vacant. When a building was half occupied, I have counted that as half and included these buildings in the above mentioned vacant retail square footage.

The Town and Country Plaza on Pioneer Blvd. has seven tenants, all retail except AG Edwards which is the only office space leased. These early tenants are paying close to $1.50 per foot, but I believe that future new tenants may get a better rate. My best guess is that it is 20% retail and 5% office space occupied. The owner is motivated and very negotiable but will not commit to any numbers without a face to face meeting with the prospect.

The Oasis Professional Office Park at Pinnacle and Oasis Blvd has eleven buildings total and 6 appear to be vacant and for sale or lease. The Brickyard on Mesquite Blvd appears to have ten vacant spaces out of a total of approximately 30.

The 100% vacant buildings in Mesquite include, 175 and 195 Willis Carrier Canyon (40,000 Sq. Ft each), Capital Materials Building 6200 Sq. Ft on 2.58 acres with yard and pole barns, two buildings located in front of Capital Materials Buildings, Calais clubhouse building, office building located in front of Calais clubhouse, Cinco Office building at 4200 Sq. Ft., Harley's Auto Repair shop on Mesquite Blvd, Rio Virgin Grill Restaurant, Credit Union building on Pioneer in front of Wal-Mart, Walgreen's Building on corner of Falcon Ridge and Pioneer, Buffalos Restaurant, Wolf Creek Office Building, Convention Center Building, NAPA auto building on Mesquite Blvd, 6000 warehouse on Aztec, 4800 tilt up building at corner of Hardy Way and Bowler, a Building East of Sears. There are a few others but this gives you a sense of the magnitude.

There is vacancy in every commercial complex and as I talked to leasing agents and building owners there was one clear theme, they are begging for people who will pay $1 to $1.50 per foot. They all offer possible tenant improvements with two to five year leases. They hint at possible lower rates, but when pressed, the lowest offer I got was a possible .50 per foot from an agent who would have to ask and see. Many of these buildings have no tenant improvements and have been vacant for over two years.

If building owners are giving away expensive tenant improvements, free months rent, paying taxes, insurance, and CAM fees, then the net is far less than current asking rents.

We have not really seen price reductions in sales prices or lease rates. The owners continue to hire agents who are inexperienced with little or no commercial background who will tell the owners only what they want to hear. I would liken it to taking a dangerous river rafting trip with a guide who knows less about rafting, the river and current conditions than you do, risky at best. They list property with no facts to support prices and at reduced commission rates, most CCIM or experienced commercial agents basically refuse to waste their time with amateur agents and over priced properties.

Appraisers call me frequently looking for comps and since there are no comps in over two years I suggest they use a capitalization approach. Of course that leads to a fair market rents discussion. In my opinion, over the next few years until Mesquite grows into the supply .40 to .60 cents a foot will be the going rate. At an 8% cap rate and .50 cents a foot the average asking price is on average about twice the actual market value. Of course the owners and listing agents are sure this approach makes no sense at all.

There is much speculation in the market about the potential effects of the Desert Falls Sports Complex; it is being used by many as justification for future values. It remains to be seen if it will ever materialize. Until it does I would say "What you see is what you get"

Chris W. Miller

ERA Brokers Consolidated

Mesquite NV 89027

702- 346-7200

435-862-5951

Mesquite Market

chris@mesquitemarket.com

Lincoln County Land Market

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