From 2009 through 2015, Las Vegas renters were afforded the luxury of renting many of the high-rise condominiums around the Strip and Downtown Las Vegas. This was due to the massive amount of short sales and foreclosures during that time. There were about 7,876 condo units completed between 2006 and 2009. Shortly after the crash, these developments shifted to luxury rentals. During 2011, we tracked 785 condos that were rented with an average of $1.31 per square foot, or $1,838 per month. During that same time, we tracked sales prices of these high condos at an average of $154 per square foot, or $239,411 per unit. We also tracked 904 sales during 2011 that typically involved investors putting their inventory back into the “shadow inventory.”
John Tippins IV, Northcap
Fast forward to 2015, and resales of this same inventory were trading at an average of $238 per square foot. Rents of this inventory were at $1.45 per square foot, or $2,000 per month. The higher-end buildings like Mandarin Oriental (now Waldorf Astoria) were at $2.70 per square foot.
The trend continues to today as sales prices continue to rise. Rents continue to go up and no new for-sale inventory is being delivered. Most of the trades happening today in the condo inventory is well below the original construction cost.
Apartment developers like Calida Group, Fore Properties, Tru Development, Southern Land Company, Ovation and Wolff see this trend. Developers are now building to the condo quality the shadow renters experienced during the downturn. They are including everything one would expect or had experienced in the condos. This includes concierge, smart homes, cabanas, cleaning service, package lockers and more. Most of this inventory is being developed along the beltway submarket, close to jobs, the Strip, the airport and newer surrounding retail.
The trend over the past couple years involves developing where renters have more walkability. Calida Group, Fore, Wolff and Southern Land Companies have embraced this opportunity. Taking into account both the condo finishes and walkability, developers are seeing rents go north of $2 per square foot and continuing to climb.
Notable current rents for these types of products include:
• Constellation in Downtown Summerlin with an average asking rent of $2,415
• Tanager in Downtown Summerlin with an average asking rent of $2,039
• Kaktuslife on the South Strip with an average asking rent of $1,931
• Green Leaf Lotus in Chinatown with an average asking rent of $1,632
• Fremont 9 in Downtown Las Vegas with an average asking rent of $1,551
The Las Vegas multifamily market is showing no signs of slowing down as rents continue to rise and the quality of product continues to increase. Developers of higher-end product take each new development to the next level. Densities are increasing with more infill development in demand. The garden-style apartments are becoming obsolete to compete for this customer. One big question is determining the right size for units. We are seeing micro apartments in Downtown go north of $3 per square foot (Las Vegas is new to the micro-apartment trend). We are also seeing developers build larger average unit sizes, with bigger closets and more common area space. Most developers are building mid-rise, interior corridor, with elevators and trash shoots. Despite their fast rise, rents in Las Vegas are still far less than our neighbors in Southern California, Denver, San Francisco, Seattle and Portland. That’s why it makes sense to bet big on Las Vegas!
— By John Tippins IV, owner and CEO, Northcap. This article first appeared in the December 2019 issue of Western Real Estate Business magazine.