Las Vegas economy on a roll as Downtown Summerlin opens

For more than 15 years, people have pestered Tom Warden about when Summerlin would get its own big shopping center.

Warden, vice president of community and government relations for Summerlin’s developer, The Howard Hughes Corp., won’t hear that question anymore come 10 a.m. Thursday.

That’s when Downtown Summerlin’s biggest phase to date — a 1.6 million-square-foot shopping, dining and entertainment complex — finally opens to the public.

But this project is way more than a mall. It began as an economic messenger heralding the dawn of Southern Nevada’s Great Recession. The unfinished, nine-story steel frame of its 200,000-square-foot, Class A office building loomed for six years over the 215 Beltway north of Sahara Avenue — a symbol of the city’s devastated economy.

Today, the project signals the downturn’s end. The 2,000-employee development is the biggest off-Strip project to open in nearly a decade: You’d have to go back to the 2007 debut of the 1.5 million-square-foot Town Square, on Las Vegas Boulevard at the Beltway, to find anything comparable.

“That’s a long time to go without a big, new project for a community that’s geared for growth,” said Jeremy Aguero, a principal analyst with local research and economics consulting firm Applied Analysis.

Downtown Summerlin is also one of the biggest retail developments under construction nationwide, second only to New Jersey’s 2.8 million-square-foot American Dream at Meadowlands, and three times bigger than No. 3, Iowa’s 668,000-square-foot Willow Creek Crossing, according to CoStar, a Washington, D.C.-based commercial real estate research firm. That rank is no small accomplishment for a city that took the Great Recession’s hardest punches.

“Just the fact that you’re seeing reinvestment, particularly in a project that had stalled and was nothing more than a steel cage for a few years, is extremely important from both a psychological and economic standpoint,” Aguero said. “Is it a harbinger of things to come, or some metaphorical corner that reflects we’re an economy in recovery and not in recession? All of those things are true. Think of what a partially constructed, empty building means. People who drove by Downtown Summerlin saw it every day. It was a symbol of just how difficult a time we went through as a community and an economy. Now it represents the opposite — a reflection that the market has turned.”

Beyond its economic implications, Downtown Summerlin’s shops, restaurants and entertainment venues mark the first phase of a grand experiment in local urban design, the seed of The Howard Hughes Corp.’s plan to create a second regional downtown. What the 400-acre plot along the 215 Beltway between Charleston Boulevard and Sahara Avenue ultimately becomes — and whether it can point the way to more development and a stronger local economy — will depend on how quickly Las Vegans respond.

“It’s important that it opens well and evolves over the next 12 months. If tenants, especially ones new to the market, do well there, it will give confidence to other retailers to open more locations,” said Matt Bear, vice president of the local office of commercial brokerage CBRE.

SLOW EVOLUTION

Thursday’s grand opening has been in the works for decades.

Look at the 1990 master plan for the 22,500-acre Summerlin. You’ll see a spot marked as a commercial center that planners have been calling “Summerlin’s downtown” for at least 15 years, Warden said.

“It’s not a new concept,” he said. “It’s just one that has taken some time to evolve.”

That evolution was altered by an epic economic downturn.

Former owner General Growth Properties announced plans in 2006 for the 106-acre shopping center, broke ground in 2007 and scheduled an opening for spring 2009. The retail developer halted work in late 2008 as home prices crashed, lending guidelines tightened and consumer spending slumped. General Growth filed for bankruptcy in 2009 and spun off Summerlin to The Howard Hughes Corp., the original developer, in 2010. Downtown Summerlin’s construction resumed in July 2013.

It was “painful” to look at the center’s steel hulk every day for years, Warden said, but the delay had its upside: Had General Growth finished the project before the downturn, it would have been an “anachronistic, enclosed mall that would be nowhere near the wonderful opportunity we see now,” he said.

Instead of another Meadows Mall, Downtown Summerlin’s shopping center is an outdoor venue laid out in the fashion of city blocks, with sidewalks and curbside parking.

Downtown Summerlin 2.0 isn’t just a second chance at urban design. It’s also seen as a sign of general economic revival in Southern Nevada. The Howard Hughes Corp. won’t disclose costs, but Warden said Downtown Summerlin, which already includes Red Rock Resort and 200 vacant acres for offices, apartments and condominiums, will run “in the 10 figures” — or $1 billion to $9.9 billion.

By way of comparison, SBE Entertainment spent $415 million reshaping the Sahara as SLS Las Vegas. And Genting Group will spend an estimated $4 billion on phase one of its 87-acre Resorts World Las Vegas on the Strip.

Downtown Summerlin is “a great indicator that our economy is really coming back strong,” Warden said. “This represents investments that are so significant that they wouldn’t be made if there were huge question marks hanging over our recovery. So it’s kind of leading the way in that sense.”

Aguero also sees Downtown Summerlin as a “manifestation” of economic improvement.

The state’s jobless rate has fallen by half since July 2011, and its average weekly wage hit $867 in the first quarter, a record for the period, according to the state Department of Employment, Training and Rehabilitation. The local population is growing, and businesses are investing in new or expanded operations, Aguero said.

“Retail has a tendency to follow those things,” he said. “Downtown Summerlin is incredibly important as an affirmation of everything we’re seeing in terms of improvement in the economy.”

With that affirmation will come a few market firsts. Downtown Summerlin retailers new to Southern Nevada include Boston Proper, Envy, Wonderland Bakery, Scene Shoes and b.young. The center’s now-glass-clad office tower is believed to be the first office project in the local market to offer tenants discount golf-club memberships. In size, scope, square footage and potential number of residents, the only other off-Strip spot rivaling Downtown Summerlin is the original Downtown Las Vegas.

All that said, Downtown Summerlin isn’t entirely groundbreaking. Town Square and The District at Green Valley Ranch already offer walkable, grid-style shopping and entertainment centers.

It’s unclear whether Downtown Summerlin will draw residents away from those projects and from as far away as Henderson and its Green Valley master-planned community, but local experts say it could.

REGIONAL DRAW

“I don’t think there’s any doubt that not only will it compete, but it will take some dollars away from those areas (Town Square and The District),” Aguero said. “A project of this magnitude and size has so much to offer as an entertainment, outdoor-living destination. If we had another recession like the one we had, it could be a problem. But when they’re done constructing this, given its location and the quality of retailers that are there, it’s much more likely that someone else is going to fail if there’s an inability to grow the market.”

Bear agreed, noting that Downtown Summerlin could affect Town Square in particular, though not to a “huge” extent.

“I think everyone is going to be excited that it’s open. The restaurant areas are really well done,” said Bear, who has placed tenants in the center. “I think people will go there. I think they’ll hang out and be very comfortable there.”

If early consumer interest is any indication, the center will open with lots of traffic.

Vicki Rousseau, Downtown Summerlin’s marketing director, said she sees considerable pent-up demand. People are “constantly trying to sneak onto the property” for an advance look, and any social-media posting about the development gets big hits online. Some consumers say they’ll skip work Thursday to check it out, and at least one doctor’s office will close for the day to let employees see the project, Rousseau said.

Consumers might want to temper their early expectations.

Bear warned locals to expect the typical, first-year fallout every new shopping center experiences as retailers whose sales fall short of expectations pull the plug.

The Howard Hughes Corp. won’t say how much space is still to be leased, though it has so far announced 111 tenants big and small for 125 spaces. Senior General Manager Andrew Ciarrocchi said retailers will open in waves through Black Friday, the day after Thanksgiving. The two anchors, Macy’s and Dillard’s, will open Thursday.

“It’s debatable how well it will do when it starts, but I don’t know anyone who thinks it will fail in the long run,” Bear said. “The question is how quickly it will go from good to great.”

That transformation could take a while. The economy has improved, but it’s not a perfect time to launch. Nevada still has the nation’s fourth-highest jobless rate, at 7.6 percent. A third of local homeowners continue to owe more on their mortgage than their home is worth — a problem because home values drive the sense of financial well-being that encourages consumers to spend.

Just down the road, at Charleston and Rampart boulevards, work on the second phase of Tivoli Village has all but stopped as partner IDB Development looks to sell its half-interest in the shopping and dining center.

Nor can you walk Downtown Summerlin’s narrow streets, bracketed by two of the valley’s busiest traffic arteries, without wondering how the center will handle the crush of visitors, which The Howard Hughes Corp. estimates will be in the tens of thousands on opening day alone.

“Everybody is keeping a very close eye on Downtown Summerlin, just like they are SLS Las Vegas. Everyone wants to know whether SLS Las Vegas will grow the sales market, and deliver on both its investment and its promise. The same thing is true of the Summerlin project,” Aguero said. “Will it get people out of their houses, on the freeway and spending more money?”

If retail spending stays flat, the market doesn’t grow and Downtown Summerlin suffers, the project could have a “chilling effect” on other developments, Aguero said.

On the flip side, if the center succeeds, expect increased commercial investments.

Some signs are already there: Aguero said he’s taking calls from businesses outside Southern Nevada who say Downtown Summerlin makes them rethink their absence here.

Some parts of the valley would benefit more than others from market growth. The mall-less northwest and North Las Vegas could see new retail development, particularly as the planned, 15,000-home Park Highlands master plan in North Las Vegas gets underway in coming months, Aguero said.

Opportunities also exist along St. Rose Parkway near Las Vegas Boulevard, Bear said. Plus, Deer Springs Center in Centennial Hills, anchored by Target and Home Depot, could see fresh interest in six or seven “junior pads” of up to 30,000 square feet put on hold in the recession. And new life could come to a failed, Vons-anchored neighborhood center at Blue Diamond Road and Buffalo Drive in the southwest.

For now, those projects wait as developers watch how the market greets Downtown Summerlin. But with $8 billion in projects planned, proposed or under construction in the city’s core, plus development in Downtown Las Vegas and the 2014 openings of The Linq, SLS Las Vegas and The Cromwell on the Strip, the local market looks to be on the upswing.

“That ($8 billion) is more development than you’ll see in a number of years in many communities that are believed to be doing better than we are economically,” Aguero said. “It is something we should point to: We are very, very lucky that we made it out of what was an incredibly difficult downturn. I just hope we don’t forget how difficult it was.”