Reeling residential and subprime mortgage markets have increased the number of renters in the Las Vegas Valley. Potential home buyers required to come up with substantial down payments amid tightening credit are increasingly turning to high-end multifamily rentals, reports the Bentley Group, a local real estate advisory firm. "Nearly 40,000 hotel rooms are coming on line over the next four years, creating more than 285,000 new jobs," Bentley Group President Christopher Bentley said. "Demand for multifamily product will increase to meet the housing needs of new employees."
Yet, the 23,494 homes listed for sale last month have created a "shadow" rental market. Roughly 25 percent or more of those units are being used as rentals until the housing market rebounds. Multifamily builders, as a result, will only deliver 1,500 new units this year, or about 1,000 fewer than in 2006, reports Marcus & Millichap, a real estate brokerage. Vacancies are expected to remain low as rents grow by 3 percent.
"Tighter residential lending standards and uncertainty in the housing market will encourage renters to delay home purchases, supporting demand," said John Vorsheck, Marcus & Millichap's regional manager. "Strong fundamentals and healthy prospects for long-term growth are supporting prices for local apartment leases."
Some of those fundamentals include job growth with 13,300 new positions created in the Las Vegas Valley at the end of September, reports Hendricks & Partners, a national commercial real estate company.
New-home closings and permits each fell by about 54 percent in September compared with a year ago, Hendricks & Partners said, while multifamily permits more than doubled to 3,810 units -- its highest quarterly mark in nine years.
"Absorption entered positive territory for the first time since mid-2006, closing the third quarter of 2007 with 345 net move-ins," said Carl Sims, an apartment specialist with Hendricks & Partners. "Las Vegas' suburbs are growing in terms of both population and new commercial development."
Stagnant incomes have also aided the rental market. The median household income for Southern Nevada newcomers is $43,831, according to the 2007 Las Vegas Perspective. Home sale list prices, meanwhile, averaged $306,000 in November, reports the Greater Las Vegas Association of Realtors, making the dream of home ownership elusive. In addition, the area's cost of living ranks among the highest in the Southwest with a 109.4 composite score, placing Las Vegas ahead of Denver; Albuquerque, N.M.; and St. George, Utah; in affordability, the Council for Community and Economic Research reports.
"Although the residential market softened dramatically in 2007, household incomes and wages haven't risen since 1990 when adjusted for inflation," said John Restrepo, principal of Restrepo Consulting Group, a Las Vegas-based economic research firm. "The apartment market will be the valley's long-term source for work-force housing. The demand for rental housing will likely rise once the current wave of new Strip resorts open."
There are 5,581 units on lease-up, 2,521 units under construction and 7,992 units planned for development, Bentley said. Although third-quarter vacancies rose slightly, due to the large number of homes for sale, rents still increased 2.6 percent. And rents are expected to rise 3.5 percent and 5.7 percent in 2008 and 2009, respectively, Bentley adds. These dynamics have created hot demand for multifamily investments, with 100-plus unit complexes commanding average sale prices of $122,300 per unit or $125 per square foot.
A Boston-based investor, for example, recently bought the 18-year-old, 256-unit Martinique Bay Apartments at 3000 High View Drive in Henderson for $31.85 million, or $124,414 per unit. The 12
Source: LVbusinessPress.com