WESTERN SNAPSHOT, JUNE 2004

LAS VEGAS MULTIFAMILY MARKET

The combination of strong job growth in 2003 and a below average number of new construction starts in the last several years has boosted occupancies in the Las Vegas apartment market, say Spencer Ballif and Jeff Swinger, first vice presidents for CB Richard Ellis. Market vacancy started 2003 at 9.22 percent but ended the year at 7.59 percent. Approximately 4,753 units — well below the 5,860-unit 10-year average — were built in 2003 while absorption for new apartments was about 7,150 units.

“Sales volume for 2003 was brisk as nearly 12,000 units were sold at a combined price of more than $670 million,” say Ballif and Swinder. “Cap rates dropped as interest rates decreased with 6 and 7 percent cap rates not uncommon.”

The cost of owning a home in Las Vegas continues to rise, furthering the apartment market’s growth this year. By the end of the year, median home prices are expected to have risen almost 62 percent over a 5-year span. In 2004, CBRE expects that vacancies will continue to decline in Las Vegas. Ballif and Swinger project that Las Vegas’ overall market vacancy will drop to 6.5 percent by December.

Luxury units and the southwest submarket are the what and where of the Las Vegas multifamily sector, according to Christopher Bentley, principal broker for The Bentley Group Real Estate Advisors in Las Vegas. Due to land availability and population growth, southwest Las Vegas accounts for 55 percent of the area’s multifamily development, with Summerlin/West Las Vegas the second most.

“[Multifamily developers] are looking for ‘tenants by choice,’ people who would rather not have the hassle of owning a home,” says Bentley.

Rental rates in Las Vegas range from $785 per month for 1990s and newer product, $677 for 1980s and $618 for 1970s-age properties. Central Las Vegas posts a 92.2 percent occupancy with Henderson, Nevada/Green Valley having 94.3 percent occupancy, south Las Vegas 93.5 percent, southwest area 94.1 percent and North Las Vegas/Sunset 92.4 percent.

“Due to the rising cost of development, you should keep your eye on older neighborhoods,” says Bentley. “Rehab will be the next big thing in [Las Vegas] residential real estate trends. The condo conversion craze and rising land prices are positively affecting occupancies.”

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