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Benjamin Spillman

Las Vegas show deals with real estate fallout

29 January 2008

LAS VEGAS, Nevada -- The housing market crash taught Ben Brown there's more than one way to say, "the check is in the mail."

And Brown, a Long Beach, Calif., furniture manufacturer, gets more than a little exasperated every time he hears a new excuse.

Brown and his wife, Barbara Emerson, are in Las Vegas scouting products at the World Market Center's winter market, a weeklong event for professional furniture buyers and sellers.

It's the first major furniture market event since the real estate market fully unraveled and buyers and sellers at World Market Center are coping with the fallout.

Brown and Emerson said in recent months that their customers are getting more innovative at dodging bills, including one customer they said sent a photocopy of a check instead of an actual payment.

That leaves the couple with less cash to buy supplies such as wood in bulk, leaving them to pay higher prices on short notice for smaller quantities.

"It kind of throws everything out of whack," said Brown, explaining how an economy as shaky as a cheap barstool is making the entire furniture business feel a bit wobbly.

The housing crash and subsequent credit market turmoil marks the first economic hiccup World Market Center operators have faced since they opened their first 10-story building in Las Vegas in 2005. They've since added a second, 16-story building and are close to opening a third, which will increase the amount of furniture display space in Las Vegas to more than 5 million square feet.

They're also planning a 17-story building to open in 2010 and by 2013 expect to have about 12 million square feet of permanent exhibition space, which would make World Market Center the biggest venue of its kind for the furniture and home furnishings industry. World Market Center developers received about $10 million in tax incentives from the city of Las Vegas on the basis that the $3 billion venue would serve as a development catalyst in an area city officials had long sought to attract economic activity.

But for now, some tenants are having a hard time justifying the cost to exhibit in Las Vegas, one of several permanent venues for the industry in places such as Atlanta, Dallas and High Point, N.C., the oldest and largest in the country and chief rival to World Market Center.

"So far we don't have a strong market here so we don't expect much," said Ada Chan of Oriental Danny, a Dallas firm exhibiting porcelain lamps, vases and accessories.

Chan said business was slow during the July market in Las Vegas. But her firm has a five-year lease and is hopeful traffic will increase as the market matures.

She's not sure whether it would be possible to get out of the lease early.

"I would if I could," she said. "If I don't see any signs of improvement ... what is the point of coming back."

Mike Howarth of Englishman's, an Atlanta-based company, said the housing slump hasn't hurt the company's business in the Southeast.

Customers who are unable or unwilling to sell their homes in a down market are upgrading their furniture instead, he said.

"They are redoing their house rather than moving," said Howarth.

He said the firm rented space in Las Vegas when World Market Center opened but left because the market wasn't known as a hot spot for upscale product lines. Englishman's recently developed more affordable product lines and returned to Las Vegas, subletting about 1,600 square feet from another tenant.

So far the company has had better luck in the Atlanta and High Point markets, but Howarth said he's willing to give Las Vegas more time.

"This one has just started so we don't know what to expect," he said.

But at $29 per square foot to rent space, plus the cost of transporting showroom displays and employees to Las Vegas, Howarth can't wait forever. All told, he said it would take about $100,000 in business to make the trip to World Market Center pay off.

"That is just to get your expenses," he said.

So far, World Market Center developers aren't sweating the real estate slump.

They view the venue as a long-term investment and say it's already paying off with high demand for lease space, interest from furniture makers and buyers in other countries and equity they've gained on appreciation of their site near Interstate 15 and Charleston Boulevard.

World Market Center doesn't release attendance figures for its events, but said preregistration for the winter market is "on par" with January 2006, a record-setting event for the center.

As new buildings open, they plan to broaden the product mix with more lighting, accessories, gifts, linens and textiles.

They say the variety will make World Market Center a better value because buyers and sellers can accomplish in Las Vegas what would take several trips to other markets.