At a ballroom in the Caesars Palace hotel and casino in Las Vegas on Tuesday night, a server in a showgirl outfit and a “strolling champagne dress” that held flutes of bubbly walked the floor while an aerial acrobat performed nearby. Another 10 feet away, a booth attracted foot traffic from those eager to have their photos taken with an Elvis impersonator.
The scene wasn’t to celebrate any wedding or other festivities, but a welcoming cocktail hour for a record number of 1,500-plus attendees who registered for the annual CRE.Converge event hosted by the Commercial Real Estate Development Association, also known as NAIOP.
For an industry that's been slowed by recent higher interest rates, there was a feeling that there could be something to celebrate this year. As the Federal Reserve in September sliced its benchmark interest rate by half a percentage point and signaled more cuts could be coming, some attendees said they are looking up when it comes to commercial property after a string of rate hikes since 2022 raised borrowing costs and sapped financing and deal flow activity.
“We're all feeling much more optimistic than we were a year ago,” Michael Bennett, vice president and head of development at New York-based DH Property Holdings, which does urban industrial developments from Miami to Boston, said in an interview.
He added that “we feel like things are starting to loosen up. There are more opportunities that are starting to make sense in terms of us trying to acquire or purchase property. We have a couple projects that went out for construction loans a year ago. We probably got one or two offers. Now we have multiple. There's more activity in general.”
NAIOP last hosted this annual event in Las Vegas in 2008, and the networking hour this year wasn’t the only thing with a Sin City twist. The three-day event also aims to highlight what NAIOP President and Chief Executive Marc Selvitelli described as Las Vegas’ “experience economy.”
“We got to put a little bit of a show on for everybody,” Selvitelli said in an interview. “We were supposed to be here in 2020 so this is our makeup for the pandemic.”
Besides panel discussions highlighting trends and outlooks across property types, the event also includes tours such as a behind-the-scenes look at Caesars Palace; the Area15 complex off the Strip that’s billed as the first purpose-built immersive entertainment district in the United States; and a visit to Las Vegas Raiders’ headquarters and training facility as part of a development tour of Henderson, Nevada, one of the fastest-growing U.S. cities just about 15 miles from the Strip.
“It's this economy here in Vegas,” Selvitelli told CoStar News. “It does such a good job of making it an experience that we're trying to showcase.”
New industrial areas
Among potential opportunities DH is eyeing, Bennett, who’s been attending the NAIOP event for 20-plus years since he first began his career as an architect, said the firm is looking at “industrial adjacent” sectors such as manufacturing, energy and infrastructure development in light of increased demand from electric vehicle charging or data centers.
While the cut in interest rates has brought in what NAIOP’s Selvitelli described as “cautious optimism,” the upcoming U.S. presidential election is a key refrain that constantly came up for many attendees CoStar News spoke to.
“I’m not picking winners or losers,” said Stewart Wangard, executive chairman at Wangard Investment Real Estate, a developer across property types based in Milwaukee. “I'm looking for what will be the tax strategy coming out of it, because if taxes are higher and it takes more out of these projects, there's less capital available to go in. We're already dealing with constraints as far as how much you can borrow for developments, because the cost of capital has gone up. The lenders will only lend up to a certain debt service coverage ratio, and they won't go beyond that. Lenders also are trying to minimize their risk.”
On top of that, he said developers in the past 30 months have been dealing with inflation and higher costs for insurance that he said “has gone up dramatically” in the Upper Midwest.
As to NAIOP, he said he plans to check out as many panel discussions as he can to “see what's the truth, what's happening out there, and … looking for visionaries who are saying ‘This is where we're heading.’”
Cold storage
One of the directions the industry is embracing is cold storage. In fact, NAIOP for the first time put together and hosted its second annual I.CON Cold Storage conference a day before the main CRE.Converge showcase with combined tour activities Tuesday.
The cold storage event, after selling out last year to 300 attendees, sold out again even after more than doubling the number of attendees to about 650, Julie Cleaver, who heads NAIOP’s planning committee, told CoStar.
NAIOP also is considering putting together a “niche” conference on data centers amid growing demand for the property type, she said.
“Cold storage right now is stronger because all of the cold storage facilities in the United States are 40 to 50 years old and they're falling apart and they're inefficient,” said Nick Schram, who heads sales at Curran Contracting based in the Chicago suburb of Crystal Lake, Illinois. He attended NAIOP's cold storage event ahead of the main one.
Aside from getting a clear read on where they should bet their money, attendees agreed attending the conference for networking was important.
“Meeting people and creating relationships. That’s what conventions are for,” said David Campbell, a senior vice president at engineering and architectural firm Huitt Zollars who traveled from Dallas. “But if you don't go home and take all the business cards you got and follow up with them, it's useless. You've got to follow up.”