February 6, 2024 MWCRE Market Pulse

• Major events in Las Vegas are boosting tourism and strong consumer spending and driving record tax collection. Visitor volume in 2023 reached the highest point since the onset of the pandemic, hitting 40.8 million, just down from 42.5 million in 2019.
• The Formula One event in November 2023 generated nearly $220 million in room revenue and gaming revenue surged to $1.37 billion, an increase of 13% from November 2022 and just below the monthly record of $1.4 billion. The average daily room rate (ADR) surged to $629 from Thursday to Saturday night of the event, a $360 increase from the prior year for the same week.
• Michael Petrivelli, CoStar’s Nevada and Utah director of market analytics, in a recent Hotel News podcast said, “Thanks to historic tourism and tax collection numbers, the Nevada state budget actually had $50 million surplus last year and $200 million more than previously projected for its two-year budget,” he added. “Currently, they’re working with the largest state budget in history.”
• The upcoming Super Bowl is expected to bring in even more revenue. The average cost for a ticket is $10,000 and the Las Vegas Conventions and Visitor Authority expects the average fan in town for the game will spend an extra $1,700 on food and drink, shopping and entertainment and is not inclusive of airfare or a hotel.
• The Las Vegas Review-Journal surveyed 138 Las Vegas hotels ahead of the upcoming Super Bowl and found that rooms will average $450/night before taxes and fees, and that number increases to more than $856/night for the 36 hotels on the Strip that were surveyed.
• Las Vegas is far and away the largest hotel market in the country by room count with 167,268 inventory rooms per CoStar, which is 34,000 rooms higher than the second largest market, Orlando.

By Rich Lachowsky

• Ground lease REITs, like Safehold (SAFE), are gaining traction among real estate agents due to their unique appeal in the dynamic commercial office space market, offering a de-risked investment option.
• Traditional REITs, recognizing the advantages, engage in ground lease transactions, as seen in successful deals like Realty Income and Wynn Resorts. This trend opens avenues for real estate agents to diversify portfolios and assist clients in unlocking capital.
• The expansion of ground leases, exemplified by Montgomery Street Partners’ $1.5 billion REIT, signals a shift in the real estate landscape. Real estate agents can leverage this trend to provide clients with innovative investment opportunities.
• The collaboration between Ares Management and The Regis Group to form Haven Capital in 2020 underscores the efficiency of ground leases as a financing tool. Real estate agents can explore these avenues to meet clients’ evolving needs.
• The ground lease market, valued at over $18 billion in 2022 and poised for substantial growth, represents a promising field for real estate agents. With predictions reaching close to $2.5 trillion in the U.S. within the next decade, real estate agents have a unique opportunity to navigate and thrive in this evolving market.

By Dan Bradford

• Wal-Mart plans to renovate 650 stores in more than 45 states and Puerto Rico, aiming to create jobs and improve customer experience.
• Walmart CEO John Furner announced the initiative, emphasizing its significant investment in labor, supplies, and tax revenue.
• The first renovated locations are expected in Santa Rosa Beach, FL, and Atlanta, GA.
• Walmart has over 4,500 U.S. stores, while Sam’s Club has nearly 600 nationwide and around 5,300 globally, totaling over 10,500 units with 2.1 million associates worldwide.
• In Q3 FY24, Walmart reported a 5.2% revenue growth, with eCommerce up 15% globally and adjusted EPS of $1.531, leading to raised sales and EPS guidance.
• Sam’s Club is testing an AI item scanning system to expedite checkout, using computer vision technology at exits to verify purchases.
• This aligns with Sam’s Club’s strategy of embracing digital innovation, offering features like Scan & Go to streamline shopping experiences.

By James Ice

• In 2023 and 2024 the tech industry experienced significant job losses, witnessing more than 260,000 layoffs in 2023 and an additional 25,000 in the first 30 days of 2024.
• Experts attribute the layoffs to pandemic-driven hiring surges, post-pandemic decreases in usage, high inflation, and weak consumer demand.
• Other factors contributing to this layoff trend include:
  • Wall Street rewarding tech companies for cost discipline, encouraging further layoffs as companies observe each other’s actions.
  • Copycat layoffs occurring when one tech company downsizes, prompting competitors to follow suit to avoid appearing disadvantaged.
  • Layoffs perceived as a self-fulfilling prophecy, where companies continue cutting staff to anticipate challenges that have not fully materialized.
• Despite positive economic indicators, nearly 100 tech companies, including Meta, Amazon, Microsoft, Google, TikTok, and Salesforce, are participating in this surge of layoffs. Nevertheless, these tech companies experienced stock price increases, with some divisions becoming more productive.
• The trend of cost-cutting continues in 2024, with major tech firms implementing smaller, targeted layoffs and focusing on key projects like artificial intelligence. The extent of office space to be vacated due to these smaller layoffs is currently unknown.
• Sources upr.org, New York Times

By Saundra Fife