Economist favors LV growth through national slump

Economist John Restrepo began his presentation by asking for a show of hands.

"How many of you believe your business is doing worse than it was a year ago?" goes one in a string of questions to the 200-member audience at Fall Trends, an economic forum held by Restrepo Consulting Group. "How many of you expect your business will be better next year?"

It wasn't the most scientific of surveys for a regional economist, but Restrepo was just breaking the ice. Many of those attending the sold-out forum at the Four Seasons are already familiar with the veteran consultant's credentials. A former researcher for Coopers and Lybrand, Restrepo formed his own firm in late 1997 as demand for Southern Nevada market data and analysis rose from inside and outside the city.

Restrepo's staff of six includes several market analysts and an appraiser. They also consult outside legal counsel. Their research emphasizes real estate and public policy at three levels: the Western United States, Nevada and Southern Nevada. The firm studies reports from nationwide sources and builds a database of demographics, personal income, tourism trends and building activity, and adds in its own research of local real estate firms.

"As regional economists, we look at how a region reacts to national economic trends. We try to create a complete picture of where the economy is headed, how it affects the local economy, and ultimately how it affects companies in our real estate market," he said.

Although not a hammer-and-nails kind of guy, his work heavily influences the local landscape, affecting development in its embryonic stages.

"Much of our work is done in terms of project feasibility; is it a go or a no-go," he said.

Developers ask him when and if their projects should be undertaken, lenders seek his insight before lending to those projects, and government agencies ask the long-term effects of serving them.

To answer their questions, Restrepo looks not only at the business climate, but at "what-ifs" as well. Numbers such as lease rates and market demographics are important to clients, but so are potential changes to state tax policy, future availability of water, and possible reactions to war or political change.

"We do two things. We help business clients in their business planning efforts. What that means in real estate development projects is it makes them more competent in the marketplace," Restrepo said. "Providing that involves a group of skills and internal resources. We offer a multidisciplinary approach to their projects.

"Research in the public sector is more land development-oriented, things like where do we put the roads. It has more regional ramifications. It's macro versus micro."

Although they analyze and report on economic conditions, they are not actual participants in real estate and development. As he told his audience jokingly, a consultant is "someone who can tell you a thousand ways to make love, but has never had a date."

"The reason we've been successful is we've been seen as objective observers of the market. What we sell is objectivity. Once we lose that objectivity, we're through as a service," Restrepo said.

Fall Trends offered forecasts and panel presentations on national, state and local issues with potential ramifications for Las Vegas businesses, as well as reports by commercial real estate agents from Colliers International.

The conclusion from the panel's two economists, Restrepo and guest speaker Alan Shlottmann from the University of Nevada, Las Vegas, was that Las Vegas is poised for the strongest growth coming out of the nation's economic slump. Shlottmann said investment from outside Nevada and continued growth within the city bode well for the valley's economy.

"Las Vegas really has the advantage in being ahead of the curve coming out of the recession," Shlottmann said.

Insurance funds and pensions nationwide have sought investment alternatives to the poor performance stock market. Real estate has become a popular option, Shlottmann said, even in smaller markets such as Las Vegas that big investors have traditionally ignored. Although secondary in size, the city is among the top in activity.

Gauging by audience and panelist comments, developers and related businesses are confident, but cautious.

"People are asking, `What should we build? What kind of rents should we be seeing? What are the soft spots? Where are the interest rates heading? How healthy are we economically in Las Vegas?'" Restrepo said.

The questions, he said, indicate a note of optimism, as did the show of hands to his opening questions.

"People are relatively more confident in Las Vegas than the rest of the country and people are generally more confident in real estate than in the stock market," he said, repeating and emphasizing "relatively."

"I think we'll weather this national economic slowdown better than other markets," he said, before adding yet another qualifier: "That doesn't mean we shouldn't pay attention to national trends, but there's definitely no cause for panic."

Restrepo said local businesses seem undaunted by the prospects of Yucca Mountain and Nevada Power Co., only modestly concerned over possible war with Iraq, but quite interested in potential changes to state tax policies.

The state projects a $300 million tax revenue shortfall this year and a $4.6 billion shortfall over the next 10 years. Gov. Kenny Guinn has appointed a task force to investigate ways of changing tax policy to shore up state coffers.

Restrepo said current state tax policy makes Nevada attractive to business, but suffers from volatility due to its heavy dependence on gaming and sales tax. With occupancy down 3 percent to 4 percent at major hotels, the state's tax receipts have fallen short of projections.

"Surely reform is needed, but the form it takes could have huge implications for the future growth of the state," he said.

An example, he said, would be the gross receipts tax under consideration, which could diminish Nevada's pro-business shine, and ultimately hurt the economy.

"That's a perfect example of the law of unintended consequences," he said, using a phrase favored among economists.

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