the residences at mandarin oriental, las vegas...the residences at mandarin oriental, las vegas one...

9
Analysis of project, market performance and influence Coldwell Banker Premier Realty—Market IQ Residenal Research July 2013 RESIDENTIAL RESEARCH The Residences at Mandarin Oriental, Las Vegas

Upload: others

Post on 17-Jun-2020

1 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: The Residences at Mandarin Oriental, Las Vegas...The Residences at Mandarin Oriental, Las Vegas One Queensridge Place may be an exception, however its suburban location and architecture

Analysis of project, market performance and influence Coldwell Banker Premier Realty—Market IQ Residential Research

July 2013

RESIDENTIAL RESEARCH

The Residences at Mandarin Oriental, Las Vegas

Page 2: The Residences at Mandarin Oriental, Las Vegas...The Residences at Mandarin Oriental, Las Vegas One Queensridge Place may be an exception, however its suburban location and architecture

The Residences at Mandarin Oriental, Las Vegas

Summary The Residences at Mandarin Oriental, Las Vegas is the only project in Las Vegas that is considered super-prime. A mere handful of projects of this caliber exist in the United States, placing The Residences at Mandarin Oriental, Las Vegas (“Mandarin Oriental”) amongst a set of elite global residences. Luxury high-rise development is relatively new to Las Vegas and CityCenter, which includes Mandarin Oriental, marks the high-point in real estate development. Incorporating features from renowned architects and designers and catering to a wealthy buyer, Mandarin Oriental continues to command sale prices up to $790 per square-foot on strong sales volume. This by far exceeds the prices achieved in the majority of Las Vegas high-rise residences. These prices are achieved through flexible offerings by the developer, lateral living through larger spaces, high-quality finishes, luxury brand affiliation, an array of world-class amenities and an outstanding service package. Further, it is part of a mixed-use, multi-faceted development which also benefits buyers at Mandarin Oriental. When viewed against comparable schemes in the Southern California, New York and other global destinations containing super-prime development, these elements constitute an exceptional value proposition inherent in the project. In the following text, we describe the market for luxury condominiums in Las Vegas, the United States and the global super-prime segment. Additionally, we examine the historical background and features of Mandarin Oriental, its influence on the market in the western United States, its buyer profile and iconic status in Las Vegas. Finally, we describe changes in the character of Las Vegas and how Mandarin Oriental fits into that evolution.

The Luxury Condominium Market in Las Vegas The luxury high-rise condominium product, new to Las Vegas, has primarily been known as a large suburban area. A period of solid population and economic growth in the 1990’s, greater commute times, an international presence and increased catering to luxury demands, led to a new interest in urban residential product. In the early 2000’s, several luxury high-rise buildings were delivered that initiated the trend. These buildings included Park Towers and Turnberry Place. Both are located off of the Las Vegas Strip but are popular with buyers and investors. In the mid-2000’s a boom in high-rise luxury development took shape. With deliveries peaking in 2007, over 6,000 units were constructed. However, when segmented by property quality, there were only a handful of projects in the upper-end of the market. Upper-end residences, see Figure 1 below, are found in Veer Towers, One Queensridge Place, Park Towers, Turnberry Place, Panorama Towers, The Martin and Sky Las Vegas. However, few sales in these buildings exceed $500 per-square-foot and although well appointed, cannot be categorized as super-prime and don’t compete with an international cadre of ultra high-end developments.

PROJECT DETAILS

225 Total Residential Homes Designed by Kohn Pederson Fox Associates, Kay Lange and Associates and Page + Steele Architects 47 stories high Designer selected finish schemes Home sizes range from 1,100 to 3,900 (approx) sq.ft.

Panorama Towers

$194 to $373/sq.ft

Sky Las Vegas

$218 to $1080 $205 to $1086

Turnberry Place The Martin

Park Towers

$388 to $754

$257 to $516

One Queensridge Place

Veer

Figure 1 Las Vegas Luxury High-Rise Condominiums—High-End Market Segment Price Per-Square-Foot Ranges Ranked by Average Price of Available Homes—Includes resale and sponsor offerings

The Residences at Mandarin Oriental

$351 to $700

$386 to $898

$/s

q.f

t

$800

$452* to $1738

$600

$400

$200

Page 1 *Grey Shell

Page 3: The Residences at Mandarin Oriental, Las Vegas...The Residences at Mandarin Oriental, Las Vegas One Queensridge Place may be an exception, however its suburban location and architecture

The Residences at Mandarin Oriental, Las Vegas

One Queensridge Place may be an exception, however its suburban location and architecture requires a more specific buyer profile. The average price per-square foot has been about $490. Mandarin Oriental transcends the Las Vegas upper-end due to its uniqueness and its super-prime attributes in finishes, amenities, service and location. As a result of product differentiation, average closing prices for initial contracts were $1,147 per square-foot leading all others in the marketplace. Mandarin Oriental was built with the idea of bringing a world-class feature rich building to the market, a market which extends outside of Las Vegas.

A Leap Higher Mandarin Oriental is best viewed in a broader context than traditional stand-alone high-rise projects. The features of Mandarin Oriental extend in multiple dimensions. First, Mandarin Oriental was built as part of a cohesive community, CityCenter, a luxury, mixed-use, urban resort linked by art filled public spaces and walkways. The overall composition of CityCenter helps define the interest of buyers. A variety of restaurants and high-end shopping experiences fulfill many requirements of urban living and the location’s proximity to the airport is extremely important. Second, Mandarin Oriental is situated above the hotel’s guest rooms and greatly benefits from its connection with the luxury hotel brand. Mandarin Oriental has a reputation for legendary, high level service. This provides comfort to buyers that the reliability of building systems and common areas will be maintained to the highest standards; preserving value.

Third, the Las Vegas market and much of the west coast marketplaces, cater quite well to the wealthy. Mandarin Oriental is well positioned to be favored among these projects by the super-wealthy, the type of global traveler that has multiple residences, but little desire to conform to small spaces. Mandarin Oriental excels in this aspect. Current offerings include living spaces commensurate in size with single family homes which are generally larger than most vertical developments. Closest similarly positioned urban projects may be found in the Los Angeles market and include Montage which is nearly sold out, which offer some larger units but is largely sold out, or Ritz-Carlton Residences at L.A. Market Impact In the Las Vegas market, current availabilities are mostly confined to condominiums smaller than 1,500 square feet. There is notable supply competition in condominiums ranging from 600 to 1,500 square feet. The gap in the market is in larger offerings, shown in Figure 3 below, i.e. condominiums ranging from 2,000 to 4,000 square feet. Mandarin Oriental offerings are at the larger end of the unit size spectrum catering to a different buyer profile. Mandarin Oriental appeals to a slightly more mature and highly affluent population accustomed to high quality finishes and serviced amenities. Given this profile, the developer invested significant resources in delivering to the very high-end of expectations.

Figure 2 Average Home Sizes in Key Condominium Markets in the Western United States

Source: Clark County Assessor, The Mark Company, Partners Trust, Coldwell Banker Premier Realty. Note: Las Vegas figures include available inventory. Los Angeles and San Francisco markets are samples of closed units.

Figure 3 Existing Inventory by Home Size Range

Source: Clark County Assessor, Coldwell Banker Premier Realty.

2

Page 4: The Residences at Mandarin Oriental, Las Vegas...The Residences at Mandarin Oriental, Las Vegas One Queensridge Place may be an exception, however its suburban location and architecture

The Residences at Mandarin Oriental, Las Vegas

As a result of the efforts to create a distinguished property at the top end of the luxury market segment, Mandarin Oriental achieved some of the highest sale prices in the Las Vegas market. Initial closings took place in an unusually strained economy for Las Vegas. However, the greatest price declines in the Las Vegas luxury condominium market took place in the 2008 and 2009 period, when sales volumes fell to near nothing and prices dropped as much as 60%. Although pre-construction contract reservations began much earlier, Mandarin Oriental closings took place after much of the market price declines had already occurred in early 2010 and it was evident adjustments were necessary. To facilitate closings on the original contracts, CityCenter Residential extended a 30% price adjustment to the original contract pricing. During the trough of residential pricing, no project escaped an adjustment period and Mandarin Oriental had also adjusted their sales program, but not the ultimate deliverable, an ultra high-end residential experience. As a result, the building maintained a superior presence in the marketplace and has since made great strides in sales velocities. After stabilizing in 2010, the overall luxury high-rise market began to rebound in 2012 and has since become a rather sought after living option and this greatly includes Mandarin Oriental. Buyers are seeing a lot of value embedded in these projects from a convenience and luxury perspective. Further, many buyers recognize that in some instances, current sale prices are very close to construction costs, signaling a long-term upside. Coinciding with a rejuvenated Las Vegas residential market, the value of purchasing at Mandarin Oriental has been clarified greatly. CityCenter Residential’s focused plan for Mandarin Oriental has yielded significant traction.

In April 2012, anticipating increased market activity, and after the imposed price protection guarantees extended to original pre-construction sales contracts, the developer reduced prices to meet the market in two ways: 1. Provided 10% off previous closing prices 2. Additional 15% off in cash inducements including lifestyle incentives or holding costs which are paid out over time. These programs did incentivize buyers and help the project gain momentum, further bolstered by greater optimism in the vertical living market segment. A combination of price resets, improving Las Vegas fundamentals and a desire for luxury living was the impetus to get a lot of buyers off of the fence. Even with a significant price reduction from the original promotion in 2006, Mandarin Oriental continues to mark the high-point in closed real estate transactions…..and by no small margin. With over 70 closings in 2013 YTD, sales have ranged from around $300 per square-foot for grey shell to nearly $800 per square-foot for move in ready penthouse homes. The average price for Mandarin Oriental’s typical offering is in the $650 to $700 per square-foot range. Figure 4 simply shows that while Mandarin Oriental is a component of the luxury residential market, it surpasses it in terms of quality, positioning, service and value. Despite being the top of the market, sales volumes have been impressive, with nearly ten closings per month in 2013. Even more compelling is that this is occurring in a project with an inventory of several $1 million plus floorplans, taking an outsized percentage of the regional market and helping to deliver further international exposure.

Figure 4 Sales Price Gap Las Vegas Luxury High-Rise Projects and The Residences at Mandarin Oriental Average Sale Prices 2013 YTD ($/sq.ft).

Source: Clark County Assessor, CityCenter Residential, Coldwell Banker Premier Realty. Note: Based on finished homes.

3

Figure 5 Key Southern California and Las Vegas Prime Developments

Source: Associated project developers, Coldwell Banker Premier Realty. *One listing remains at Montage Residences. Prices include the resale market.

Page 5: The Residences at Mandarin Oriental, Las Vegas...The Residences at Mandarin Oriental, Las Vegas One Queensridge Place may be an exception, however its suburban location and architecture

The Residences at Mandarin Oriental, Las Vegas

Although an iconic Las Vegas project, Mandarin Oriental is more appropriately compared to other, global developments that cater to the super-wealthy seeking large, home-like condominium residences perfectly located and well serviced. Mandarin Oriental has become the Las Vegas benchmark for other projects for quality and price. In this manner, Mandarin Oriental has had a meaningful impact on the Las Vegas market. Going forward, projects will assess themselves using Mandarin Oriental as the highest metric. International Context: Key Global Comparisons Super-prime, vertical residential development has existed in many forms and has largely been constructed in cities that are international destinations. Mandarin Oriental is a new entrant in this space, bringing a sought after lifestyle to the region for the first time. In this regard, Mandarin Oriental should be viewed in a wider lens than Las Vegas alone.

Figure 6 Sample Offerings of Global Super-prime Condominium Residences

Las Vegas The Residences at Mandarin Oriental $1,556/sq.ft

Beverly Hills The Montage Residences $2,684/sq.ft

Los Angeles The Ritz-Carlton Residences at L.A $1,586/sq.ft

New York City 15 Central Park West $5,009/sq.ft*

*Closed sale, all others are asking prices. Source: Global Property Guide, Knight-Frank, The Mark Company, Partners Trust, Associated Project Developers, Coldwell Banker Premier

London One Hyde Park* $11,240/sq.ft

Shanghai Tomson Riviera $4,409/sq.ft

Hong Kong Opus Hong Kong* $9,838/sq.ft

Vancouver The Erickson $1,754/sq.ft

Singapore Boulevard Vue $3,386/sq.ft

4

Points of Differentiation The approach of the developer of The Residences at Mandarin Oriental, Las Vegas was a clear message of differentiation from existing Las Vegas high-rise residences. Both CityCenter and Mandarin Oriental exist as an important contribution to modern, urban design. In its debut, the project was positioned to be the market leader in terms of finishes, amenities, ancillary services and necessarily, price. The Residences delivered on the message with a rich set of attributes:

Mandarin Oriental residences, which are purchased from the developer, also include an exclusive membership in MGM Resorts International M life program, M life Curated Living. Residents are provided Platinum level membership, amenity benefits and earn rewards for every dollar spent at MGM Resorts properties. A collaboration with the developer and architects at Kohn Pedersen Fox Associates, The Residences at Mandarin Oriental, Las Vegas is a striking addition to the Las Vegas skyline, raising the bar for developments in 21st century Las Vegas. CityCenter was named “Best Project” for overall quality by Commercial Property Executive. The Residences at Mandarin Oriental, Las Vegas is a Recipient of the LEED® (Leadership in Energy and Environmental Design) Gold Certification from the U.S. Green Building Council.

Amenities and Services

Private residential entrance and lobby

Owners’ lounge

Secured, private residential elevators

Executive board-room

Owners’ recreation quarters

Mandarin Oriental valet parking

services

Mandarin Oriental door men services

Mandarin Oriental concierge services

On-site management

Hotel Services & Amenities Available to Residential Owners

Elevated pool and cabana retreat

Conference facilities and business

center

Fitness facility and yoga studio

Dining and retail

The Spa at Mandarin Oriental

Tea Lounge and Mandarin Bar

Laundry and dry cleaning services

In-room dining

Private catering

Page 6: The Residences at Mandarin Oriental, Las Vegas...The Residences at Mandarin Oriental, Las Vegas One Queensridge Place may be an exception, however its suburban location and architecture

The Residences at Mandarin Oriental, Las Vegas

Super-prime development has been part of a trend in major cosmopolitan areas like Monaco, Singapore, Shanghai, Moscow, London and Beverly Hills (some recent offerings are found in figure 6). These projects go beyond status and resonate at a higher emotional level than typical urban offerings. With an affinity for design features by renowned architects and designers, combined with a high level of service, the global wealthy have sought out the few developments that have recognized this trend. Some of the residences being offered in the super-prime market segment are customizable units, many of which are found in grey shell. For this reason, it makes it difficult to make side-by-side comparisons for the homes themselves. However, many individuals’ desire the option of finished product or grey shell. Both are available at Mandarin Oriental. The possibility of a floor plate combination is available at Mandarin Oriental as well. When compared to other global super-prime developments as a backdrop, including Mandarin Oriental projects in New York, Boston and London, the value proposition comes increasingly into focus. If we view Mandarin Oriental within the context of the U.S, much of which is increasingly being recognized as a solid value play, Mandarin Oriental excels in this space. It competes well with other projects in the Western U.S and has little direct competition within Las Vegas. Why Las Vegas? Las Vegas has increasingly become a cosmopolitan city, drawing visitors and residents who may appreciate the well-known Las Vegas nightlife and gaming, but also desire activities found in other major metropolitan areas.

From the 1990’s through the early 2000’s, Las Vegas added a considerable amount of gourmet dining and world-class shopping experiences (including Crystals at CityCenter) as well as entertainment and cultural options such as the Smith Center for Performing Arts. The Smith Center brings Broadway shows, jazz, opera and dance to a world class entertainment facility. Cirque du Soleil performances, all located within locations on the Las Vegas Strip, continue to be a hit with visitors. Outdoor recreation options, including boating, hiking, aviation and mountain climbing abound in the local area as well.

Visitors to Las Vegas are increasingly interested in non-gaming activities. Food and drink revenues by some large leisure and hospitality firms has expanded from about 25% of total revenues in the 1990’s to nearly 35% today. Average expenditures on sightseeing and shopping have increased significantly as well.1

CityCenter and Mandarin Oriental have been built with a broader experience in mind, one which may include

gaming, but also other activities, including dining, shopping, entertainment and public fine art. Mandarin Oriental appropriately caters to a lifestyle experience which ascends prior possibilities and has closed a significant gap in the market. From the map in Figure 7, we observe a significant movement from heavily urbanized areas such as the northeast, and Las Vegas has always hosted moves from the Los Angeles area. Many of these individuals and households are accustomed to urban living and seek similar product in their new market. By several measures, we estimate a return to positive net-migration to the Las Vegas metropolitan area. These metrics include driver’s license surrenders, household

5

1. Las Vegas Convention and Visitors Authority, Las Vegas Visitor Profile 2012.

Figure 7 Household Moves to Clark County, NV as Measured by Customer Moves

Source: Unite Van Lines

Page 7: The Residences at Mandarin Oriental, Las Vegas...The Residences at Mandarin Oriental, Las Vegas One Queensridge Place may be an exception, however its suburban location and architecture

The Residences at Mandarin Oriental, Las Vegas

On the Horizon Demand for homes in Las Vegas and to a large extent, the United States, had fallen precipitously during the 2007 through 2010 period. However, these price declines were asymmetric, with older single family and garden style condominiums dropping the most from peak values. Newer, high quality developments have preserved much more equity and are now seeing gains. We view Mandarin Oriental in a similar light to other prestigious projects in several cosmopolitan cities and it exists as a major point of distinction from most regional projects. Another consideration is the lack of development on the horizon. Few developers are moving forward on prime or super-prime development in the United States. Las Vegas has even more limiting factors due to the lack of financing for new projects. Therefore, the small competitive landscape insulates the project in the market for super-luxury residences.

Current Offering Example

moves (measured by moving companies) and residential utility hookups. Migration patterns have mirrored our observations for second home buyers as well, including those purchasers in our surveys of luxury condominiums. There are several reasons we believe Mandarin Oriental can capture a greater share of sales for super-prime real estate in the U.S. As mentioned earlier, prices are commensurate with other prime projects, yet it has a very high value proposition. Secondly, 2013 sales points towards significant momentum within the project and this has not gone un-noticed. Figure 8 illustrates the rebound in visitors to Las Vegas, which surpassed pre-recession levels in 2012. Other drivers of the Las Vegas economy, including gaming revenues and retail sales, have clearly defined rebounds as well. Positive migration, an improving business climate and a strong second home market may all have an impact on Mandarin Oriental. Since Las Vegas is an international destination, many foreign nationals are continuing to view real estate in Las Vegas.

This is particularly true for Canadians. In 2012, 23% of all U.S transactions by foreign investors and second home buyers were from Canada (NAR, 2013). In 2011, Canadians accounted

for 73% of foreign transactions in Nevada. Foreign interest and a continued draw from Southern California is bolstering the luxury residential market in Las Vegas. When viewed against other international destinations, United States real estate is increasingly returning as a favored set of assets. Frothy housing markets in Australia, China and some Canadian cities continue to give investors and second home buyers pause for thought. Instead of placing monies in an elevated price trend, placing monies in a recovering area is a popular notion.

6

Figure 8 Las Vegas Visitor Volume

Source: Las Vegas Convention and Visitors Authority.

Visitor Volume is Exceeding Pre-Recession Levels

Page 8: The Residences at Mandarin Oriental, Las Vegas...The Residences at Mandarin Oriental, Las Vegas One Queensridge Place may be an exception, however its suburban location and architecture

The Residences at Mandarin Oriental, Las Vegas

Further, on a relative value basis, many foreign buyers are finding that the project represents a comparably strong value against other high-caliber projects. These attributes all exist within the context of an overall improvement in U.S real estate and particularly Las Vegas. The noteworthy design of the project, an appetite for luxury living that has been maintained despite a recession and improving regional economic conditions has positively influenced sales. Extreme luxury and relative value has clearly resonated with buyers. Recent contracts as well as vibrant 2013 closing activity paints an improved picture, and we believe CityCenter Residential’s product repositioning and focused marketing plan will continue to drive sales.

7

Page 9: The Residences at Mandarin Oriental, Las Vegas...The Residences at Mandarin Oriental, Las Vegas One Queensridge Place may be an exception, however its suburban location and architecture

Residential Research

Coldwell Banker Premier has facilitated a multitude of residential transactions in Las Vegas. We draw on this experience and information obtained from local government, U.S Census, third party data purveyors and the Greater Las Vegas multiple listing service. The information is deemed reliable but is not guaranteed. Market IQ analytics and consulting. www.lasvegashomes.com

AUTHOR

John McClelland, Vice President, Research CONTACT Coldwell Banker Premier Realty Strategic Services-Market IQ Phone: 702-938-1375 Email: [email protected] Web. www.lasvegashomes.com 8290 W. Sahara Ave, Suite 200 Las Vegas, NV 89117 SERVICES

Strategic advise and consultancy

Residential property services

Commercial property services

Property management

Property advisory

Broker Price Opinions

Real estate market research

Regional economic analysis

The information and opinions in this report are believed to be reliable and has been obtained from sources believed to be reliable. Coldwell Banker Premier Realty makes no representation as to the accuracy or completeness of such information. The opinions expressed in the report constitute the judgment of the authors only and may not reflect the opinion of Coldwell Banker Premier Realty. This report is provided for informational purposes only and does not constitute investment advice. Copyright © 2013 Coldwell Banker Premier Realty.