Multifamily development has come to a near halt in Las Vegas. In 2011, only two market rate properties finished their deliveries with a total of 682 units, most of which had already been completed in 2010. Only one market rate property was started in 2011. This 156-unit project was originally started as for-sale townhomes, but after a foreclosure, the development is being completed by Alliance Residential as a rental property. Other development is limited to affordable or senior housing. We are expecting a limited number of market rate starts this year, but at numbers that will not significantly impact existing inventory.
The most active market rate developers in Las Vegas over the past years have been Picerne Real Estate Group, Alliance Residential, Fairfield Residential, Ovation Development, Trammel Crow Residential and Nevada West Development. Fore Property Company has been active in both the market rate and affordable sector, and Nevada Hand remains active in the affordable and senior sector.
Between 2003 and 2007, 47 properties totaling 13,483 units were converted to condos. The combination of unsold units from these conversions, as well as the unsold units from properties built as condos during that time, has added 4,625 units to today’s rental pool. This includes 1,439 luxury condo units along the Las Vegas Strip.
Rental and occupancy declines are slowing significantly. Concessions are starting to burn off, and owners are adjusting rents rather than giving substantial upfront concessions. According to ARA’s survey of same store net rental income growth, the fourth quarter of 2011 showed a slight increase in rental collections over the same period in 2010. This increase has happened despite a decrease in reported rents and occupancy, meaning that concessions and other economic losses are declining.
Based on the latest statistics released by the Nevada Department of Employment, Training and Rehabilitation, a total of 4,300 jobs were added to the Las Vegas metro area employment market during 2011. Significant increases were reported in leisure and hospitality (+9,400), while more modest gains were reported in education and health services (+2,100), and professional and business services (+1,400). Declines within the construction sector continued to slow, posting a year-over-year decrease of 600 jobs. Other sectors that offset overall gains included government and financial activities (-3,600), and trade, transportation and utilities (-1,000). After reporting three consecutive months of declines, Southern Nevada’s unemployment rate increased 0.3 percentage points in December to 12.7 percent. The local unemployment rate remains 4.2-percentage points above the national rate, giving some hope to this market.
— Christopher D. Bentley, principal in the West Region, Apartment Realty Advisors (ARA)