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IN BUSINESS REAL ESTATE REINCARNATIONS OF VACANT RETAIL SPACE IN SOUTHERN NEVADA COULD TAKE DECADES By Buck Wargo staff writer Record levels of retail vacancy could prompt some changes in the Las Vegas real estate landscape over the next decade, analysts said. The vacancy rate is more than 10 percent in the valley, and excess inventory could take years to absorb. The glut of new space constructed during the boom has led to a drop in rents that has made some aging space less attractive. That could prompt some retail properties to be converted to other uses such as call centers or medical offices, and in some cases demolished so they can be redeveloped into other uses, analysts said. Even some of the newer retail space constructed in the past five years could face the wrecking ball unless a steep drop in rents helps lure tenants. "There's a lot of stuff that was built that brokers have questioned why," said John Stater, research director at Colliers International Las Vegas. Stater said some strip centers don't have the front of stores face the street but have the rear to them instead. In addition, older properties are under scrutiny, Stater said. Some grocery stores have consolidated in neighborhoods and left space that has yet to be filled, Stater said. "Some of the grocery stores own the space, and the last thing they want to do is fill it up with the competition," Stater said. "They would rather just pay the property tax and not worry that it's sitting there empty." Losing a grocery store or junior anchors in a retail center is a big blow REAL ESTATE REALTY ONE GROUP OUT TO COMPETE NATIONALLY By Buck Wargo staff writer Las Vegas real estate brokerage Realty One Group announced it's expanding its footprint in California. The company opened an office Sept. 1 in Corona in Riverside County. It has four offices in Orange County. Realty One said it's planning to open offices in San Diego in 2012. In August, the brokerage acquired John Hall & Associates as part of its expansion in Arizona. "I feel there's a window of opportunity over the next year or two to go against the national brands because they are soft and weak," Realty One CEO Kuba Jewgieniew said. "They have an old model, and it doesn't work anymore. Our model is the future." Jewgieniew said many national brokerages take a percentage of each commission on sales, but his firm charges a flat transaction fee and allows the agent to keep the remainder. Realty One Group was listed by INC. 500 as the 17th fastest growing real estate company with an impressive 410 percent jump in revenue between 2007 and 2010 to $2.1 billion. The company said it's on pace to close nearly 16,000 transactions in 2011, which would elevate it to the top 10 in the nation. It had more than 13,000 transactions in 2010. Jewgieniew said the company's goal is to reach No. 5 in 2012. The company was listed No. 1 in Southern Nevada in a recent list by VEGAS INC for volume of transactions. It will be challenged by Prudential Americana Group, which in August acquired Century21 MoneyWorld. to owners because they need smaller tenants to fill the rest of the space. "I think a lot of space could be redeveloped but that could be a 20- year process," Stater said. "There's so much empty space." Turning retail space into educational facilities is an option but medical uses may be difficult because there's plenty of that space available, Stater said. Medical practices can also turn to lower-priced office space, he added. "Everybody's trying to figure out a silver bullet, but the problem is one doesn't exist," Stater said. "This is going to be a slow process." John Restrepo, the principal at RCG Consulting, called some of the newer spaces obsolete and said they will likely have to go through foreclosure and repurchasing before rents can be lowered enough to make them leasable. In some of the strip centers that have vacant space, Restrepo said it's difficult to readapt larger vacant space by converting it into smaller stores. "To be honest, some of that is going to have to be demolished or it's just going to sit there for a long period of time," Restrepo said. The best opportunities for readapting existing spaces are in neighborhoods that cater to immigrants, he said. That's been the case in the east valley, where aging fast-food restaurants were turned into Mexican restaurants. That won't work in neighborhoods where there aren't such immigrant populations, Restrepo said. In other parts of the valley that have vacant retail space, there's a chance they could be turned into recreation centers, community centers or other uses when local government's finances improve, he said. That's happened in the past along Maryland Parkway when an aging retail center was redeveloped into a grade school and park, Restrepo said. "But all this happens over time," he said. "I've seen some stuff that's been vacant for 20 years, and it hasn't been torn down yet." Brian Gordon, a principal at Applied Analysis, said everything's on the table and property owners are becoming creative to deal with the changing economy. Many are targeting discount retailers that attract shoppers, but older shopping centers are going to look at new uses, he said. "I think that's going to happen on the lower end of the market and buildings that require a lot of capital investment now to be viable," Gordon said. David Grant, a retail broker with Colliers International, said he's seen cases where retail buildings have been turned into call centers in the past because of the need for parking. Some empty retail space, which includes former car dealers, however, may have to be demolished and turned into apartments or a single- tenant use, he said. As for newer retail space built in mid-block during the boom, Grant said it will take a drop in lease prices to generate tenants. Despite a poor location, there are opportunities to attract insurance agents and other businesses that don't require high visibility, he said.