The Las Vegas retail market is currently under significant stress as it digests the effects of closures of major national retailers and the impact of the national and local economic downturn. The overall market of 62.1 million s.f. has shown negative net absorption in 7 of 9 local submarkets in the first quarter of 2009, resulting in an overall vacancy rate of approximately 12.4% as of the end of the quarter, up from 9.9% at the end of the 4th quarter*. The loss of large anchor stores like Circuit City, Mervyn’s, Linens ‘N Things, Office Depot and others have created big holes in power and community centers and have dragged many smaller retailers down in their wake. The most recent Restrepo Consulting Group survey of anchored retail centers shows current vacancy of 7.6% which is double the 3.4% vacancy in the same quarter of 2008**. Unanchored strip centers have experienced higher vacancies due to the stress suffered by undercapitalized Mom and Pop tenants that used easy credit and home equity to finance start up stores over the past four boom years. Rent levels are dropping from their peak of two years ago. Also, the excess leverage provided by CMBS lenders has negatively impacted developers of all sizes as recent cash flow has eroded below aggressive breakeven points.

Despite all of the bad macro-economic news, a number of in-fill retail markets in the Las Vegas area are still performing well and are signing new leases albeit at somewhat reduced rents. There is a noticeable uptick in local and national consumer confidence as the economy stabilizes. Local gaming and tourism statistics appear to have stabilized recently and are slowly trending back up. We also anticipate a positive impact in the jobs sector as the MGM City Center project is completed and opens at the end of 2009. These indicators will translate to better, if not robust, sales growth in the near future. Our conclusion is that the retail sector requires a much higher level of due diligence to spot the opportunities and that there will be some compelling conservative deals to be done. We are confident that the Las Vegas retail market will continue to provide solid long term results.