The Sphere in Las Vegas has taken off. But the nearby 68-acre business park owned by Blackstone has done a belly flop and now sinks toward default.
Once dubbed “Nevada’s business district,” the 1.4 million-square-foot Hughes Center is nearly half empty and has gone into special servicing, the Las Vegas Review-Journal reported.
The 10-building office complex at 3753-3993 Howard Hughes Center Drive is 42 percent vacant, a 7-percent increase from late last year, compared to last quarter’s 11.1 percent office vacancy across town.
The office park south of Wynn Golf Club off Paradise Road, once popular with law firms, benefited by being next to the Strip. But that’s now a liability because of traffic and an influx in local entertainment, Michael Petrivelli, director of market analytics for CoStar Group, said.
“This used to be a prime location near the Strip,” Petrivelli told the Review-Journal. “But now it has become a huge headache for commuters going in and out of there, especially since the Formula One construction started last year.”
Last spring, New York-based Blackstone stopped making payments on a $325 million loan tied to the office park and went into special servicing.
“We began writing this property down three years ago and completely wrote it off earlier this year,” Blackstone said in a statement often repeated after questions about any of its troubled office properties. Its statements say it wants to pour money into sectors with “strong fundamentals propelled by macro demand trends.”
The landlord, which has shifted its focus toward student housing, data centers and industrial warehouses, has cut its office properties to less than 2 percent of its portfolio, compared with more than 60 percent in 2007.
In April, Blackstone told the Review-Journal it had $20 billion of real estate in Las Vegas, 95 percent in rental housing and leased industrial properties and hotels.
Two industry experts predict its office park will soon be sold.
“You have a prime location next to the Sphere, the Venetian, the proximity to the Strip,” Petrivelli told the newspaper. “The issue is, the current use of the property now has nothing to really do with the Strip and the activity that’s happening there right now.”
Read more
Commercial
National
Blackstone reports 12% profit drop
Commercial
Los Angeles
Blackstone “completely” writes off Playa District office campus
Commercial
San Francisco
Blackstone seeks to surrender Club Quarters hotel in San Francisco
Taber Thill, of the office division for Colliers Las Vegas, said it’s likely that parts of Hughes Center will be redeveloped into hotels, with some remaining offices. For some companies, he said, having offices near the airport makes sense.
Thill, who handled leasing at Hughes Center from 2002 to 2017, said occupancy could increase if the pipeline of new office building construction slows because of high interest rates, with companies still looking to move to Las Vegas.
Lease rates at Hughes Center range from $2.75 to $3 per square foot, according to CoStar. The average lease rate in Las Vegas is $2.52 per square foot, according to Colliers.
— Dana Bartholomew