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January 31, 2006
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The Icon Las Vegas (center)
was cancelled
Image courtesy Related Group |
Las Vegas is known as a place where buildings
are imploded before their time. Right now projects are getting
imploded before they even out of the ground. Developers are
canceling plans for high-rise residential towers near the
Strip due to rising construction costs and slow sales. Southern
Nevada leads the country in population growth, adding 7,000
new residents per month. Its rapid urbanization has caused
a 99 percent increase in land pricing over the last 12 months,
resulting in a vertical building boom.
“There are 60,000 condominium and 19,000 condo-hotel
units currently proposed, planned or under construction in
the Las Vegas Valley,” says John Restrepo, principal
of Restrepo Consulting Group, a Las Vegas real estate research
firm. “But we anticipate that less than 25 percent of
those units will actually be built in the next five years.”
Related Las Vegas, for example, a joint venture between The
Related Companies, New York, and The Related Group of Florida,
called off its “Icon Las Vegas” project on January
6, due to escalating construction costs. The $325 million,
514-unit development along Convention Center Drive, just east
of the Strip, consisted of two 48-story glass-and-concrete
towers. Designed by Arquitectonica, Miami, with interiors
from The Rockwell Group, New York, the 4.5 acre project was
nearly sold out when Related pulled-the-plug. The company
cites a six-month delay from a lawsuit filed by an adjacent
rival project that complained of obstructed views and emergency
vehicle easements. The case was later settled out-of-court.
“During the time it took to resolve the lawsuit, construction
prices had increased so drastically that we were unable to
build Icon based on it’s original pricing,” says
Marty Burger, president of Related Las Vegas.
Busy contractors are quoting prices week-to-week due to rapid
material and labor cost increases, which have climbed 10 percent
to 30 percent over the last year, say local firms. Slow-selling
projects, as a result, must budget enough money into the development
for construction inflation.
Diversified Real Estate Concepts, Chicago, canceled its $600
million, 825-unit Aqua Blue condo-hotel off-Strip project
in July due to high building costs. The Jeffrey Beers designed
development had basketball-star Michael Jordan as an investor,
with plans for a Jordan-branded steakhouse, café and
athletic center.
Other projects, meanwhile, are being flipped for a quick
buck to capitalize on the region’s escalating land values.
Australian Developer Victor Altomare sold the 0.68-acre parcel
for his planned 21-story, 236-unit Liberty Tower condo project
along the Strip in early January for $5.5 million. The deal
resulted in a 600-percent mark-up over its original $900,000
purchase price-tag in 2004, county records show.
“Only 13 of the valley’s 107 planned projects have
broken ground thus far, and just 10 have gone vertical,”
Restrepo reports. “Experience, financing, location and
branding remain the key ingredients for a project’s successful
transformation from a Web site into a vertical reality.”
Tony Illia
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