More Companies Gambling on Sin City
It used to be only high-stakes gamblers went to Vegas looking for an easy million.
Today, entrepreneurs are flocking to Sin City to cash in on a safer bet -- an influx of residents and a booming local economy that has generated a slew of new business opportunities.
Over the past five years, Sin City has led the nation in population growth, with a surge of more than 21 percent during that period, or roughly 5,000 new residents every month. The metro area alone is expected to hit more than 2 million by the end of 2007, recent reports show. As a result, while the number of entertainment and tourism jobs has shot up 14.2 percent since 2002, growth is equally impressive in areas like financial and professional services. Construction alone is up almost 50 percent, while the city's unemployment rate hovers around a low 3.8 percent.
That kind of growth has consumers spilling out of casinos and looking for main-street businesses like dry cleaners, restaurants, real-estate agencies, and drugstores.
"The casino and tourism industry is still the big dog around here, but it's amazing how many smaller businesses feed off that animal," says Michael Graham of the Las Vegas Small Business Development Center. "There's a ripple effect."
In turn, their presence is laying the groundwork for a few fast-growing companies as well, like Zappos.com, an online shoe retailer that moved to Las Vegas from San Francisco just three years ago and made more than $250 million in annual revenue in 2006.
Like its casinos and hotels, the city's office, retail, and industrial space continue to expand to meet a seemingly never-ending demand, according to national real-estate firm CB Richard Ellis. This year alone, developers are expected to deliver 4.5 million square feet in new office space, along with another 2.9 million square feet over the next two years, the firm says. That reflects a growing demand that's pushed office vacancy rates down 1 percent this year to 10.1 percent. Although average office rental space crept up three cents to $1.81 per square foot in 2006, new for-sale office condo projects are now enabling smaller businesses to own rather than lease their properties, according to the firm.
Real estate in the retail sector is even tighter, with availability dropping to a three-year low of just 3.68 percent in the first quarter of 2006. Developers also report 100 percent occupancy rates for new commercial projects by the time of completion. In addition to new high-end arrivals like Barneys New York and Whole Foods, smaller clothing outlets and grocery stores are also cashing in.
What's driving all this, Graham says, is cheap housing. "Over the last decade or so, you could come here and make an average income and yet still afford to buy a house," he says.
Cara Roberts, a spokeswoman for the Las Vegas Chamber of Commerce, said high-profile tourist attractions may draw attention to the city, but what keeps people there are solid economic fundamentals.
"There is no corporate or personal income tax here, so people tend to look at Nevada as a place where it's possible to achieve the American Dream, where you can buy a house and start your own business," Roberts said. "A vacation can turn into a choice to make Las Vegas your home."
Over the past decade, these and other developments have also given Las Vegas a new reputation as a legitimate national commercial center. Of the nearly 40 million visitors the city attracted in 2006, roughly 15 percent were business-meeting and convention attendees, according to the Las Vegas Convention and Visitors Authority. Those numbers are widely expected to rise in 2007 thanks to a surge in local and national industry events like the Consumer Electronics Show, the Specialty Equipment Market Association, and MAGIC Marketplace. That, and over $25 billion in planned development to boost the city's hotels by more than 170,000 rooms by 2010, according to the agency.
"Las Vegas continues to reinvent itself," says Rossi Ralenkotter, president and CEO of the convention and visitors authority.
Still, given the sheer numbers involved, some are beginning to worry about keeping the pace of economic growth manageable, given that the city was never designed for millions of permanent residents. Transportation and infrastructure -- not to mention the availability of potable water in the middle of the desert -- are becoming serious concerns.
"The important thing is to try to diversify this economy," Graham said. "We're still growing at an incredible rate, but we need to get a better handle on how to sustain that growth."
That requires finding ways to attract more investment-rich sectors, including technology and medical-research firms, he says.
It helps that as many as a dozen new universities and colleges have sprouted up in recent years, including high-tech and medical-research programs that didn't exist in the region a few decades ago, Graham said.
In many ways, the influx of people has itself diversified the marketplace. "The market has simply recognized the need for different services and adapted," Roberts says.
Another budding strategy is entrepreneurial education. About nine months ago, the Las Vegas Chamber of Commerce spun off a new subgroup for local entrepreneurs in their 20s and 30s, offering a mix of social events and mentoring opportunities with local business leaders.
"It's a way of nurturing our up-and-coming business leaders so that we'll be able to hold on to our best and brightest," Roberts says.
Already, the so-called Vegas Young Professionals group has attracted more than 500 members, from store managers to insurance agents and account executives -- not exactly the card dealers, showgirls, and Elvis impersonators with which Vegas is more often associated.
For that matter, take the winners of this year's inaugural Las Vegas Chamber of Commerce small-business awards, which went to a local CPA and business advisory firm, and a marketing consultant. Not quite the racket Bugsy Seigel might have envisioned.