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Benjamin Spillman
 

A pause for World Market Center

23 July 2008

LAS VEGAS, Nevada -- The World Market building boom in downtown Las Vegas is on hold -- at least for now.

The leader of the largest furniture industry-only showroom west of North Carolina says plans to set a construction date for a 17-story fourth building are being deferred until the end of the year.

World Market Center President and Chief Executive Officer Bob Maricich said the sudden crash of the nation's real estate and credit markets has wreaked havoc on the furniture industry and contributed to an air of caution throughout Las Vegas when it comes to new construction.

Investors say they remain committed to completing their vision for a $3 billion, 12 million-square-foot project that would be the largest of its kind the nation. They're just not sure when they'll announce a construction date for the next phase.

"We have deferred it until the end of the year, to make a decision at the end of the year," Maricich said.

The revelation that World Market Center investors are doing anything but plowing forward full speed is a diversion from the breakneck development pace they've set from the beginning.

Since 2005, three of the market's seven major industry events, including the summer market that starts Monday, have included the opening of a new building, each representing an investment worth hundreds of millions of dollars. The center does not release attendance figures, but it has likely attracted 300,000 or more people to Las Vegas since its inception.

The latest addition is Building C, a just-completed $550 million structure with 2.1 million square feet of space, which will bring the total square footage of the project to about 5 million and the amount invested to $1.1 billion.

It also includes a new parking garage managing partner that Shawn Samson says is engineered to support upgrades to accommodate traffic from two future buildings, meaning they've already spent money to ensure that overall development of the 57-acre site will continue.

"In many ways, the construction has already started," Samson said.

Samson and partner Jack Kashani embarked on the project in 1998. Since forming the idea for a furniture industry center they expanded the scope numerous times before opening the first building with backing from the Related Cos., one of the most prominent real estate development companies in the United States.

To ensure future growth, Samson and Maricich say they are evaluating how to broaden the World Market Center's appeal beyond its current customer base, which is mostly furniture retailers.

They've already created space in the existing buildings for Las Vegas Design Center showrooms designed to attract interior designers. And the upcoming market will feature a partnership with a furniture market based in Italy.

They plan to expand into the gift segment of the home furnishings industry as well as kitchen and bath sectors.

Samson said diversification will give the market an advantage over competitors, particularly the High Point Market in High Point, N.C.

High Point was founded more than 100 years ago and is in the heart of the country's furniture manufacturing region. Until recently, it was far and away the dominant national location for furniture makers to showcase new products for visiting buyers.

"What we don't want to do is just duplicate other markets that are focused on a single segment of the industry," Samson said.

Keeping the selection fresh and the momentum going has been a central theme at World Market Center events. The market makes money by leasing space to manufacturers who, in turn, expect the market to deliver enough furniture buyers to twice-annual events to justify the cost.

Market officials won't publicly reveal lease rates but acknowledge rent is costlier in Las Vegas than North Carolina. They quickly add, however, that it is cheaper and easier to get to Las Vegas and rent a hotel room than it is to make the multileg journey and find lodging in rural High Point.

The dour economic news -- particularly when it comes to real estate -- has thrown a wet blanket on the once-hot furniture industry, prompting World Market Center to ratchet up efforts to drive attendance.

The most recent event in January, which came as the impact of the real estate crash on the furniture industry was beginning to unfold, included a drawing for $500,000. At next week's event, World Market Center will fete attendees with a performance by singer Rod Stewart.

The attractions are important because competition in the industry is fierce and falling behind can be costly.

Since World Market Center established itself as the dominant West Coast operator in the field, a competing market in San Francisco announced it would radically change its 70-year-old format to stay afloat. In January, San Francisco Mart officials announced they would move industry-only furniture exhibitors out and transform their market into a venue that is open to the public.

"Markets before us took decades to get to the point we got to," Samson said. "We have obviously kept our promise of keeping our momentum going."

Las Vegas Mayor Oscar Goodman credited World Market Center for creating momentum for a drive to revive development downtown. The center, which received millions of dollars in tax incentives, is built in what was once an empty, neglected area of the city.

It's construction preceded development of the Lou Ruvo Brain Center, a medical facility that is a centerpiece of a broader, mixed-use development project in the same area.

"They've done everything they said they are going to do," Goodman said. "They have been people of their word."

Given the economy, Goodman says it makes sense World Market Center developers would proceed with caution.

"It is smart capitalism," Goodman said. "You are entitled to take a breath and look around and evaluate what is happening in the rest of the world."