Humble Beginnings
In 2005, Las Vegas celebrated its centennial anniversary, commemorating its transformation from a sleepy desert town into a world-class city of unparalleled gambling, architecture, and leisure activities.
Spanish explorers discovered the Las Vegas area—the “fertile lowlands”—in 1829. Ironically, Mormons were the region’s first settlers in 1855.
In 1905, as a way to bring people to the area, railroad authorities auctioned the desert land that would become modern day Las Vegas. From the total land available, they designated Block 16 for vice, which drew masses of customers to the popular Arizona Club for drinking, prostitution, and gambling.
In 1910, they incorporated in Las Vegas, but lawmakers also outlawed gaming. However, they ignored the other vices and never enacted any additional prohibitions. During the Great Depression of the 1930s, state officials realized the isolated desert town needed an economic boost if it were ever to flourish.
After planning for nine years, construction began on Hoover Dam in 1931. Four years of construction were expected to lead to a greater economy, which motivated legislators to legalize gaming statewide that same year. President Franklin D. Roosevelt dedicated the structure in 1935.
Many remembered gaming’s successes from those earlier days, and hoped it would again entice customers to spend their money within Nevada’s borders. They also realized that a thriving illegal gambling industry threatened the integrity of law enforcement, making prohibition unenforceable. The memory of the failure of alcohol prohibition during the 1920s into the early 1930s remained fresh in their minds.
Las Vegas struggled through the Depression (1930s) and World War II (1941 to 1945). However, the prosperous late 1940s postwar years changed the gaming landscape.
Events in neighboring Southern California helped Las Vegas. The gambling boats that had operated offshore from Los Angeles closed down, creating a new customer base for Las Vegas. Gaming pioneers, such as legendary Sam Boyd who had been a dealer on these boats, relocated to Las Vegas in the early 1940s in search of a new life and livelihood.
Casinos soon appeared along Fremont Street, the heart of downtown Las Vegas. They also spurred population growth. In 1940, the Las Vegas population was slightly over 8,400, with an additional 12,000 residents throughout Clark County.
The late 1940s launched an era of development and opportunity in Las Vegas. The El Rancho Vegas opened as the first vacation resort property on an isolated site south of downtown. At the time, land was plentiful throughout the Las Vegas valley.
According to attorney Paul Larsen, a shareholder with Lionel, Sawyer, and Collins law firm in Las Vegas, early zoning laws addressed these issues. “Originally, casinos on the Las Vegas Strip had to be zoned H-1 (resorts and apartments), and could be standalone projects without a hotel. For business reasons, many original projects on Las Vegas Boulevard—or The Strip as it came to be called—were built as resorts with standalone amenities, so patrons would remain onsite. Most customers were from out of town,” Larsen stated.
Legendary mobster Ben “Bugsy” Siegel gets credit for raising the standard of gaming for its era, but the El Rancho Vegas and The Frontier had already opened. Siegel brought in New York mob money to complete the project after its original developer ran out of money.
The Flamingo opened on Christmas Eve in 1946 as the first true luxury resort rising from the sand. However, Bugsy was murdered shortly after opening The Flamingo after he was accused of skimming money from the building funds.
The Flamingo was a success, sparking other projects. Realizing the lucrative potential, the state levied its first gaming taxes that same year.
Several other casino sites opened south of downtown on Las Vegas Boulevard, dubbed “The Strip” in 1952. That changed the Las Vegas dynamic forever, creating a complete resort destination. The original zoning regulations soon required casinos to be paired with a larger hotel facility, and they could no longer function as a standalone operation.
nine-story skyscraper casino. In 1958, the Stardust opened an 800-room hotel, introducing the show extravaganza and bright exterior neon lights.
During those ten years, the Las Vegas population tripled and revenues soared. In 1955, the Nevada Tax Commission created the Gaming Control Board, followed by the Nevada Gaming Commission in 1959.
The population more than doubled again to 64,400 in 1960. The 1960s introduced the first of the giant themed properties, like Caesars Palace, Circus Circus, and the curved hotel architecture.
Again, the city limits of Las Vegas expanded to accommodate the growing number of residents, relocating from other cities to fill a soaring number of jobs. Development and tract housing began to appear in numerous neighborhoods.
Changing Ownership Spurs Growth
Dozens of entrepreneurs who had opened their own casinos continued to operate throughout Las Vegas during the 1960s into the 1970s. By that time, the Las Vegas population had reached almost 126,000, with an additional 147,000 throughout Clark County.
A 1969 law permitted publicly traded corporations to obtain casino licenses. The entry of corporations like Hilton and Harrah’s helped Nevada reach the milestone of generating $1 billion in revenues in 1975; Clark County hit the $1 billion mark in 1977.
On its 75th birthday in 1980, the Las Vegas population surpassed 164,600. Such growth required a coordinated plan for an improved infrastructure.
Larry Singer is vice-president director of corporate services for Caldwell Banker Commercial ETN in Las Vegas, and one of southern Nevada’s top commercial real estate brokers. He said: “The first true surge in pricing occurred during the 1980s when land values ranged between $400,000 and $500,000 per acre. Non-gaming land that could be developed away from The Strip could be valued at $20,000. The upward trend in values continued into the following decade when values surpassed the $1 million per acre mark.”
In November 1989, Steve Wynn revolutionized Las Vegas casino operations with the opening of the ultra luxurious 3,039-room Mirage. This themed property forever changed the Las Vegas dynamic and psyche, plus considerably raised the real estate bar. That began the era of themed mega-resorts with lavish amenities.
The 1990s saw the debut of numerous themed casinos along The Strip. As the land was developed further south, the price per acre also rose. Mega corporations like MGM MIRAGE, Caesars, and Bally’s invested billions to gradually replace private ownership.
In order to control casino growth wisely, the Nevada Legislature adopted SB 208 in 1997, which mandated very specific objectives. It created a 3,000-foot section “resort corridor” on The Strip, allowing the construction of resort hotels. It required at least a 200-room hotel with very specific amenities. The law also prohibited the expansion of resort hotels within 500 feet of residential property outside the resort corridor.
Larsen stated that because The Strip actually lies beyond the municipal boundaries of the City of Las Vegas, Clark County governs the land use. “Clark County has adopted even more stringent laws, requiring at least 300 hotel rooms, a minimum $50 million investment and even stricter prohibition on the creation of new casinos outside the resort corridor,” he said.
Wynn’s Bellagio again raised the standard for luxury in 1998, and then sold his empire to the MGM organization in May 2000. He reentered the marketplace with the opening of The Wynn Las Vegas in April 2005, almost 100 years to the day from the original railroad auction.
The 1990s population trend continued upwards, increasing from 750,000 early in the decade, then reaching 1,000,000 by 1995 and more than 1,430,000 by 2000.
However, the onslaught of population to fill entry-level jobs affected the residential real estate market. Jeremy Aguero of Applied Analysis, a financial advisory and economic consulting firm in Las Vegas, said: “The area has witnessed nation-leading population, employment and income growth. Growth generally has seen its ups and downs, but employment growth has been closely linked to the opening of major casino-hotel projects.”
Absorbing the expansion has proven challenging. “To accommodate this population growth, low-rise multifamily and lower-cost single family housing was developed. To meet the needs of the expanding economy and population, developers moved away from The Strip, increasing demand for the extension of our road systems to the outer areas of Green Valley and Summerlin, which evolved into small towns in their own right,” Singer claimed.
Desert City Today
Las Vegas has become one of the fastest growing cities in the world, with a population nearing two million, which is increasing every month. City officials claim a newcomer arrives in Las Vegas every six minutes, and a new home is under construction every 19 minutes.
According to the estimates of the Nevada State Data Center’s Comprehensive Planning website, the population will increase by an average of 2.3 percent annually, totaling more than 3.5 million in the greater Las Vegas area by 2035.
What has drawn thousands to this desert metropolis each year? The answer lies in a few key elements of Las Vegas life: relatively inexpensive housing, no state income tax, abundant service jobs, warmer weather, gaming, and continuous entertainment.
However, this influx comes with a cost. Because the metro area has tripled in size since 1986, the seemingly limitless supply of land is dwindling. A 1998 federal law, which evolved from a legal settlement to protect the habitat, drew a boundary and set limits on future growth.
Metropolitan Las Vegas is now comprised of City of Las Vegas, Henderson, North Las Vegas and Boulder City. Clark County also manages a significant portion of land, referred to as Unincorporated Clark County.
Some real estate professionals estimate the available land is consumed at a rate of 6,000 to 7,000 acres each year. To maximize potential construction, traditional subdivisions are packing houses within feet of one another.
Rising from the Mojave Desert, Las Vegas faces some definitive logistical limits. Developers moving north toward Mesquite, or south toward Arizona and a proposed new airport, will have to contend with infrastructure issues like roads, utilities, and sewers.
Comprehensive construction could take years to complete. Future “cookie cutter” developments will be relegated to areas requiring significant commutes to jobs on The Strip, or other popular employment centers.
Additional problems could plague Las Vegas in the future. In an August 2006 article, Chicago Tribune journalist Michael Martinez cited a recent drought and water shortage as a key impetus to reshape the Las Vegas image from a desert oasis to a “stressed city in North America’s driest desert.” These potential disasters require tough code measures on everything from landscaping to water usage.
Singer acknowledges that the real estate market stalled in 2006 and the housing market is overbuilt. Still, compared to neighboring California’s high taxes, Las Vegas is a haven for California retirees seeking economic relief and a similar climate.
He claims that in today’s market, land developed on The Strip may cost $10 million per acre. “Industrial land is scarce. Very expensive smaller lots, worth between $450,000 and $550,000 per acre, are available, which makes it difficult for the industrial development to be profitable. Commercial acreage is worth twice that figure. Office development is planned, but few new projects were started due to high land and construction costs,” Singer said.
Casino resorts are a different issue. Giant corporate ownership, with billions in available funds, has replaced private entrepreneurship. Wall Street looks favorably upon the gaming industry, especially since it remains one of the most regulated growing industries in the U.S.
Aguero explained, “There are more casino gaming projects under construction than in any five-year period in the state’s history. Land prices have increased by more than 200 percent during the past 24 months, and the housing prices have doubled. This certainly increased the demand for gaming activities, particularly among local operators.”
Rather than sprawling outward, architects and engineers are now compelled to building upwards to offer primary and vacation housing. Singer says that local governments have created opportunities for high-rise development. Mixing housing and gaming is a trend that has firmly taken hold.
“Condomania” hit Las Vegas in 2005. Several high-rise luxury condominium/casino hotel projects, ranging from Donald Trump’s Trump International Hotel & Tower, to MGM MIRAGE’s Project CityCenter, to Boyd Gaming’s Echelon Place, are underway. These developments, and several others, will add 10,000 to 15,000 condominium-hotel units to the current hotel inventory by 2010.
Today, Las Vegas boasts almost 40 million visitors annually, a far cry from the early days as a remote desert town connected to other cities by rail. Technological advances, including air travel and air conditioning, have allowed Las Vegas to flourish in the desert heat.
The city first named for its “fertile lowlands” has exceeded the wildest dreams of its founding fathers, early lawmakers, and entrepreneurs. They could only hope their town would catch on and crowds would be drawn to spend some of their time and money. If they only knew what a century would bring.
Sharon Harris has reported on the North American and Caribbean casino gaming industry since 1993, and the American coin-operated amusement industry since the 1980s. Based near Atlantic City, Sharon can be reached at (609) 601-7890 or sharonhar[at]aol.com.
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