|DETRIMENTAL TO RENTAL HEALTH
Broker says land
scarcity, condominium craze mean there are fewer apartments to rent
Although the Maryland Villas apartments are going up on 13th
Street, local real estate observers say land availability is
preventing other rental projects from getting planned.
With fewer than 600 apartment units under construction in the Las
Vegas Valley, the rental market is going through its own
availability crisis, a multifamily housing broker said.
Apartment developers simply cannot compete with single-family
home builders and commercial developers when it gets down to the
price of land in the valley, Bentley Group principal Chris Bentley
He's mapped out three complexes that are about to bring units
onto the market and another 17 properties with 4,162 units that are
in the leasing stage, most of them around the beltway in the
southwest valley and U.S. Highway 95 toward Henderson.
Most of the 4,560 apartment units planned for development have
either started construction within the last couple of years or are
planned for land has been held for three or four years, well before
the valley's current land crunch, Bentley said.
"It's extremely difficult for apartment developers to find land,"
he said. "It looks like there's a lot of planned units, but that
doesn't mean they'll be built. Some could be condos."
Carolyn Boyle, public information officer for Clark County's
comprehensive planning department, said some developers apply for
building permits five years ahead of the construction schedule.
Things happen along the way that can kill those plans -- financing
falls through or the partners break up.
"We really don't count them as multifamily residences until they
pull a building permit," she said.
Completions are on track to reach 1,740 units this year, down
from 5,250 in 2004, said Chris LoBello, regional manager of Marcus &
Millichap in Las Vegas. Much of the new multifamily construction is
focused on condominiums, he said.
Apartment rents continue to creep higher and are expected to
reach $806 by the year's end, a 6.1 percent increase from 2004.
Year-end effective rents, which take into account landlord
concessions such as free rent and discounted move-in fees, are
projected at $780 a month, a 7.9 percent gain from a year earlier.
The higher rents make finding affordable housing more of a
Bentley said the answer to the affordable housing conundrum is
not the Las Vegas City Council's proposal to place a moratorium on
condo conversions, which are taking 5,000 to 6,000 apartment units
off the market this year.
"Apartment development is way down and I don't think it's going
to change any time soon," Bentley said. "Developers have a hard time
competing for dirt. It makes more sense for them to build condos and
high-density single-family residences."
Multifamily rental units continue to be in high demand with about
one in four Las Vegans living in an apartment, Bentley said. Rent
growth that's forecast to increase by 10 percent within the next
year and 97 percent occupancy that has eliminated many concessions
are driving the market, he added.
Smaller apartment complexes are also in high demand. A majority
of properties with fewer than 100 units are being purchased by
out-of-state investors, Bentley said. Most of the investment capital
is coming from California, he added.
Because the smaller complexes are usually older and a little less
expensive, they attract attention from an expanding pool of
"However, in terms of growth potential, the under-100-unit market
in Las Vegas still has plenty of gears left before reaching terminal
velocity," Bentley said.
High demand for condo living is leading many developers to
convert their rental projects to condo sales before those projects
are finished, Marcus & Millichap's LoBello said.
Other developers have jumped on the condo conversion bandwagon in
Las Vegas. Florida-based Skyrise Development paid $55 million for
the 504-unit Canyon Gate apartments in western Las Vegas and
Sovereign Capital Management acquired its third local property with
the $47.5 million purchase of the 380-unit Horizon Bluffs apartments
Fewer apartment projects are on track to finish this year and
rents are rising.
Year Completions Change
2005 1,740* -67%
Year Rent** Change
2005 $806* +6.1%
** Average per month