Vegas is symbol for building industry's state

By James B. Kelleher - Analysis

LAS VEGAS (Reuters) - The world's construction equipment makers gather this week for their triennial trade show in Las Vegas, a city that symbolizes their industry's own mixed fortunes.

Las Vegas is ground zero in the burst U.S. real-estate bubble, an implosion that has prompted residential builders to stop placing orders for new equipment from the companies whose wares are on display here.

Yet commercial construction is on a tear in this gambling Mecca -- as it is in much of the rest of the world -- with nearly 46,000 new hotel rooms either under construction or planned over the next five years.

That frenzied activity has helped offset the decline in U.S. home construction. While Nevada led the country last year in foreclosures and 90 percent of the ZIP codes in Las Vegas saw median house prices fall, the number of workers employed in construction has remained relatively stable, according to Keith Schwer, an economist at the University of Nevada, Las Vegas -- down only about 4 percent.

"If you look at the numbers, we should be deep in the tank," Schwer said. "But we've been hanging on" because of the estimated $30 billion in non-residential construction projects either underway or in development.

But to Schwer and others, the cranes that loom over the city's casino-dotted main drag also form a series of giant steel question marks at the end of a nagging question: How long can the strength in commercial building offset weakness in residential construction?

In the United States, the question has already been answered and commercial construction has followed residential lower -- though not to the same degree.

"It was weak last year," Jim Owens, the chief executive and chairman of Caterpillar (CAT.N: Quote, Profile, Research, Stock Buzz) said on Tuesday. "In terms of capital goods sales to it, they were off sharply last year."