Tuesday, August 14, 2012

Vegas Apartments Continue to Struggle

It’s been a couple quarters or so since we’ve shined the spotlight on the Las Vegas apartment market. There’s still not much that’s good to say here. But maybe a look at some ugly numbers will make us feel even better about the really healthy stats seen almost everywhere else.
Getting the ugliest piece of info out of the way right off the bat, effective rents for new leases in Las Vegas as of 1st quarter 2012 still were roughly 16 percent below the rates seen in the pre-recession days of late 2007. That hole is more than twice as deep as the challenge faced in Phoenix, the market with the second-biggest rent decline. The best spin you can put on this is that pricing finally has stabilized. Average effective rents in early 2012 exactly matched early 2011 results, and the minor quarterly shift of -0.2 percent also showed basically flat pricing.
Slicing and dicing the rent performance data doesn’t show much of interest. There’s just not a product niche or individual neighborhood where the annual rent change level strays too far from zero.
Las Vegas apartment occupancy now stands at 91.9 percent, still quite low. In this measure, however, at least some progress is being made. Occupancy improved 0.6 percentage points on a quarterly basis and 1.9 points annually. Since bottoming in late 2007 at 89 percent, occupancy has climbed nearly 3 full points.
There’s a very distinct pattern in occupancy by product sector in Las Vegas, with the best properties in better shape than the less desirable communities. Occupancy registers at 93.8 percent in developments built since 2000, 92.6 percent in the 1990s-era stock, 91.1 percent in the 1980s-vintage inventory, 89.9 percent in the units from the 1970s, and 83.4 percent in the handful of projects completed prior to 1970.
With that pattern in occupancy by product age so pronounced, occupancy by neighborhood for the most part just reflects the age concentration of the stock within the specific submarkets.  At the top of the list, then, are more upscale areas like Henderson, Green Valley, and both South and Southwest Las Vegas, all with occupancy a little over 94 percent.
Since top-tier product in Las Vegas is approaching the occupancy performance that should allow some rent growth to kick in, MPF Research anticipates that the metro’s overall rent change figure finally will shift into positive territory during the next few months.  The rent growth number almost certainly won’t be big, but the pricing change at least should be moving in the right direction.


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