Labor, Population Growth Drives Las Vegas Multifamily Market
Las Vegas continues to benefit from a strong labor market, which is driving demand and strong fundamentals in the multifamily sector. Employment in Southern Nevada increased by 3.4 percent over the past year, reaching one million workers, while the total population in Southern Nevada increased 2.2 percent, surpassing more than 2.2 million people. With a well-documented shortage in housing, developers added more than 3,200 new apartment units during the year and still saw vacancies decrease 30 basis points to 5.2 percent.
Part of what is driving the tremendous growth in Las Vegas is the billions of dollars in commercial developments. This includes several major resort renovations (Palms, Monte Carlo, Caesars), several new resort developments (Paradise Park, The Drew, Resorts World), and the $1 billion expansion of the Las Vegas Convention Center. There is also the $1.9 billion football stadium that is helping usher the city into a new era of professional sports.
On the capital side, multifamily properties continue to be highly sought after by both private and institutional
buyers. Although transaction volume slowed in the first quarter of 2018 compared to the same period a year ago, total volume was more than $350 million in the first quarter, marking the third straight start to the year at such peak levels.
Strong fundamentals and strong demand have also pushed up property values with average prices hitting $105 per square foot, per unit in the first quarter of 2018. It is important to note, however, that this average is heavily impacted by a high number of large Class A transactions. Average prices were much more modest for smaller transactions, at $66 per square foot, for assets valued between $1 million and $20 million.
With a tight housing market and strong employment forecast, multifamily fundamentals in Las Vegas are expected to continue their strong performance for the remainder of 2018 and well into 2019.
— By Michael LaBar and Michael Shaffner, first vice presidents of investments, Marcus & Millichap. This article first appeared in the June 2018 issue of Western Real Estate Business magazine.