Las Vegas Bets on Diversifying : Emphasis Placed on Attracting Industrial, Home Development

Times Staff Writer

A number of years ago, supersalesman Elmer Wheeler coined a phrase that was to become the keystone of his motivational seminars for a dozen years.

"Don't sell the steak!" Wheeler would boom from his podium. "Sell the sizzle!"

Psychologically sound advice, but for this oasis of neon and high rollers that has deified the bare female bosom, it has never translated well: "Don't sell the city, sell the glitz!"

And it has been, literally, only in recent months that Las Vegas' efforts to sell itself to corporate America as a sober, pro-business growth site--for which gaudy, bouncing Las Vegas Boulevard is only a local, although unique, curiosity--have begun attracting serious national attention.

"And high time," home builder Hal Ober sighs wearily.

"It's been rough trying to get anybody to look beyond The Strip when they think about Las Vegas as a desirable place to live."

The current president of the Southern Nevada Home Builders Assn. and also president of RA Homes which develops roughly 11,000 residential units a year in the Las Vegas/Henderson area (from detached homes to condominiums to apartment complexes), Ober's initial experience with the negative Las Vegas image was a sobering one when he relocated from Tucson in 1977.

With deep, home-builder roots in Southern Arizona, where new and expanding industries gravitated naturally because of the relaxed life style, pleasant climate, low real estate costs, and a vigorous, dedicated employment pool, Ober was ill-prepared for the "Yes, but . . . " reaction that was almost universal when Las Vegas' own, comparable, attributes were mentioned.

"The problem wasn't with the buyers," Ober recalls, "it was with out-of-state lenders. They all said the same thing: 'We don't want to lend money in Las Vegas . . . not in Sin City!' It was so serious that I went to the governor and persuaded him to set up a committee to address it. The state launched a public relations drive and it apparently worked--the lenders have done a 180-degree turnaround. Now, they've all decided that it's a great place to do business."

The "Sin City" reputation, local boosters admit, has not only colored the thinking of would-be-lenders, but has similarly inhibited would-be employers who somehow felt that the environment of the city created a "different," less reliable work force.

It is a concept that was pooh-poohed by such firms as Citicorp when the New York-based bank holding company chose Las Vegas as the site for what might be considered a sensitive operation--a credit-card processing center.

"About 90% of the 415 people we've hired to date are locals," according to Fred Winkler, Citicorp's legal counsel, "and it's been a very good experience. We didn't resort to psychological screening or anything like that--just our standard hiring practices. What a lot of people seem to forget is that Las Vegas has one of the highest, if not the highest base of high school graduates in the country. They've got good, basic skills, are highly trainable and well motivated. We know that a fair share of our people came out of the gaming industry, but we don't know how many." Winkler adds: "It isn't that important to us.'

Blocked by Disinterest

But compounding the problem for many years in Las Vegas was a local disinterest on the part of many local movers and shakers whenever the desirability of diversification was mentioned: Gaming and tourism had been good to Las Vegas. Why rock the boat?

"We're on the rebound, now," Jim Cashman, chairman of the Nevada Development Authority says, "but the general economic doldrums of 1982 and 1983--while it didn't stop our growth-- certainly flattened it out. And Atlantic City, of course, sure didn't help, either. For the first time, we were really hurting."

One side benefit of the slow-down: "It got a lot of people around here interested in diversification who hadn't cared, one way or another, before. We're not ashamed of what Las Vegas is . . . we're proud of it because that's what made it great. It's just that there's another side to it which was overlooked for a long time."

The Nevada Development Authority which Cashman, a heavy-equipment dealer, heads goes back almost 30 years. It was primarily a volunteer operation serving as an advisory group when corporate inquiries were received. Tourism and gaming, then and now, fall under the aggressive Las Vegas Convention and Visitors Bureau.

NDA Turns Aggressive

"About eight or nine years ago, though," according to Fred Couzens, an NDA associate, "the structure was changed and we became a full-time, nonprofit, organization financed through private companies, some communities and the state Commission on Economic Development." And, even though the economic downturn that was to underline the need for diversification was still a few years away, the NDA's role shifted from a passive information bureau to that of an active vendor of the state's desirability as an industrial/commercial site.

"In the last five or six years, alone," Couzens adds, "we've brought in between 70 and 80 companies, which translates to about 4,000 new jobs--all the way from small cabinet-making operations to companies like Levi Strauss, which came in 1978 and employs about 200 people, to Citicorp's brand-new 120,000-square-foot credit-card facility which will employ about 600 by the end of the year."

For pro-diversification forces here there has always been a certain amount of jealousy over the apparent ease with which other Sun Belt cities--and Phoenix is the most frequently mentioned example--have had in attracting a broad and diversified core of corporate headquarters, regional operations and high-tech light-manufacturing facilities. And, with them, a rapidly expanding, highly skilled work force and an equally rapidly expanding base of stable, high-income retirees.

Las Vegas, the city's promoters point out, has essentially the same climate as Phoenix--mild winters and hot summers--the same laid-back, outdoors-oriented life style, and the same low humidity that is such a magnet in attracting high-tech manufacturing operations.

"And then there's Nevada's tax situation," the NDA's Couzens adds. "No state personal nor corporate income tax, no inventory tax, no gift or inheritance tax--and one of the few, if not the only, western state with no unitary tax that taxes corporate income coming in from out of state."

Real Estate Is Key

But it is the real estate picture, Las Vegas boosters maintain, that remains the city's biggest lure for both outside investors, corporations needing inexpensive raw land for their plants or offices, and affordable housing for their workers--qualities already in the wistful-dream category in Southern California, and fading fast even in competitive Phoenix.

And while Las Vegas, to some extent, is also suffering the same office glut impacting so many growth cities--a vacancy rate of about 23%--the figure is misleading, in the opinion of Don Haze, Coldwell Banker's vice president and resident manager. "It's actually closer to 18% after you subtract some projects that are going to be in trouble for a long time, anyway." And an 18% vacancy would put Las Vegas on a par with rival Phoenix (18.6%) and in considerably better shape than both Denver (26.4%) and Houston (27.9%). Los Angeles' current office vacancy rate hovers at about 16.4%.

"We estimate," Haze adds, "that we're in about a two-year 'hold' pattern right now on office construction."

"There's a tremendous amount of activity here in commercial land sales, which is indicative of growth in the eyes of sophisticated developers," according to Coldwell Banker's industrial/commercial supervisor, Doug Albright. "Downtown land is selling in the $35 to $60-a-square-foot range--with $40-to-$45 representing the average," he continues. "And, in outlying areas, we're talking about $4 to $6 a square foot."

'Bargain Sites'

(Recent sales in the Los Angeles downtown "core" area were in the $150-$200-a-square-foot range.)

Office rentals, Albright adds, are about $16 to $19 a square foot a year in Class A buildings, and from $3 to $3.60 a year for commercial and industrial.

"Commercial always follows residential," Haze adds, "and, in retail space, the vacancy factor is about 6%. On good industrial space, in fact, we're near the zero-vacancy rate--almost all of the large buildings are gone."

But it is in the lively residential real estate market--particularly on Las Vegas' northeast, west and southwest sides--that the contrast with the Southern California situation is so acute. More and more, the decision to relocate to--or expand existing operations within Los Angeles and Orange counties is colored by the specter of "affordability," (or the lack thereof) that hobbles management's recruiting and transfer efforts. It's increasingly hard to sell the desirability of a 100-mile daily round-trip commute, greater compensation notwithstanding.

But in Clark County (Las Vegas, North Las Vegas, Henderson and Boulder City), according to home builder Hal Ober, raw land is plentiful at about $40,000 an acre, or roughly $10,000-per-detached home site. And, with building costs hovering at about $30 a foot, the selling price for homes begins "in the mid-60s," Ober adds. "We do most of our detached homes in the $60,000 to $150,000 range. Condominiums are common with a $40,000 price tag."

And, while some Las Vegas workers commute from as far as Boulder City (27 miles) and Henderson (17 miles), a 10-mile intra-city commute is the norm, and the explosive growth of residential developments on the city's west side is largely traceable to east-west Interstate 515 bisecting the city.

Low Land Costs

"It's primarily in the land costs, rather than the construction costs--which, generally, are comparable--that spell the difference between Las Vegas and our market," according to John Newcomb, president of The Anden Group in Covina which develops both detached and attached residential properties in the Rowland Heights, Sunnymead and Walnut areas.

Raw land costs, although they vary sharply from area to area, Newcomb says, will "average out to about $25,000 to $30,000 a lot on the basis of four to an acre"--two-and-one-half to three times the Las Vegas range--"and the per-acre price for land for attached housing is about double that, although, of course, it averages out considerably lower per unit." In other words, $100,000 to $120,000 an acre for detached housing's land costs and $200,000 to $240,000 an acre for town houses or condominiums.

"Most of our single-family detached housing," Newcomb adds, "runs from 1,480 to 2,400 square-feet and sells in the $125,000 to $150,000 range. The closest comparable to Las Vegas would probably be our Sunnymead development in Riverside County--single-family detached homes in the 1,000 to 1,400-square-foot range that sell in the neighborhood of $70,000 to the mid-90s."

But while investors are drawn to Las Vegas' modest, single-family, detached housing market--where resale rental homes can be picked up in the $55,000 to $70,000 range and rented for $550 to $650 a month--upscale, luxury developments are also beginning to dot the city's outlying areas.

Upscale Housing

--On the southwest side of town, developer Jose Blasco's Spanish Trail subdivision--with town houses selling in the $125,500 to $220,000 range and villas in the $164,500 to $298,500 range--sprawl around a $10-million, Robert Trent Jones-designed golf course. The entire development is surrounded by eight miles of wall and 130 of the 160 estate lots have already been sold.

--Also on the west side, a stone's throw from Citicorp's new credit-card facilities, the first phase of the Collins Brother's development, The Lakes, has opened with 23 of the 43 custom lots--averaging $175,000 per lot--ringing the 30-acre man-made lake, the first of two lakes planned.

Admittedly a Johnny-Come-Lately in the complex and long-range effort to move away from its one-industry-town reputation, Las Vegas is (appropriately) betting heavily on its current drive to diversify.

Pointing, for instance, to the city's easy accessibility to the West Coast and mountain markets. An accessibility that will be further enhanced when work is completed on the massive expansion of McCarran International Airport--an expansion that will triple its present 10.1-million-passenger-a-year capability.

And, in an obvious bid to attract high-tech, Space Age industries, pointing also to the 1986 completion of the new 101,000-square-foot, $14.7-million School of Engineering and Computer Science at the University of Nevada at Las Vegas as a future in-house source of bright, young talent.

With a population today of 537,000, and looking toward a projected population for the county of a million by the year 2000, the area's need for a broader employment base is clear--and in an environment where gaming and tourism are just a part of the whole picture.

As a red-eyed dealer from Caesar's Palace, blinking in the hot sun at McCarran International, put it: "It's really a great town . . . after working for six months at Atlantic City, I can't imagine living anywhere else. There's only one thing wrong with it: you find out you've got relatives all over the country you never heard of . . . and, when you go to work at 2 in the morning, they all hit town at noon."

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