| DETRIMENTAL TO RENTAL HEALTH Broker says land scarcity, condominium craze mean there are fewer apartments to rent By HUBBLE SMITH REVIEW-JOURNAL
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 said. 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 problem. 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 investment buyers. "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 in Henderson. APARTMENTS Fewer apartment projects are on track to finish this year and rents are rising. Year Completions Change 2005 1,740* -67% 2004 5,250 Year Rent** Change 2005 $806* +6.1% 2004 $757 *Projected ** Average per month
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