2017 Commercial Update and 2018 Forecast for South Lake Tahoe

It has been a good year for commercial development In South Lake Tahoe.   We have seen a number of redevelopment projects and sales in 2017 which finally indicate a recovery in the basin from the 2007/2008 financial crisis. 

The largest investment this year has been the purchase of the Chateau project by a Chinese-American group for $45.5 million.  They will build out the “hole in the ground” with a couple hundred new condominium units.  The second largest investment is by Halferty Development with the Bijou Marketplace at the corner of Ski Run and Hwy 50.

At the Y, the old Factory Stores have been given a facelift and a new set of restaurant and retail tenants.    Next door, McDonalds Corporation demolished their old store and built a beautiful new one during the summer season.  Further down the street, Blue Granite Climbing Gym is under construction with their new building.  Several of the old motels on Emerald Bay Road have been purchased over the past year and we are waiting to see if any of those properties are redeveloped like some in Stateline. 

2017 was a flat year nationally for much of the commercial real estate industry, with the exception of multifamily development.  This segment has been the recipient of low interest rates and a housing availability/affordability crisis which has resulted in higher rents.   Office space and industrial has been flat and retail has taken a hit due to online shopping and Amazon.  

For 2018, the National Association of Realtors (NAR) is forecasting a stable commercial market.  Interest rates will be rising, inflation should stay under 3%, and GDP will continue to grow at around 2.5%.  Commercial inventory will continue to be weak, sales volume flat or down, and prices up.  For small cap markets like ours, the industry has enjoyed a year on year price increase of 6.7% and an average cap rate of 7.3% for the first half of 2017- and that is expected to continue.   2018 should be a good year for commercial investment in South Lake Tahoe. 

Whether you are buying or selling, timing could be perfect as this market has compelling offerings.   Call me anytime to discuss your requirements.  Thank you for an opportunity to work with you and we wish you a wonderful 2018.

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