Escalating land prices fuel high-rise construction

November 7, 2003 - The shrinking availability of land has increased property prices, resulting in denser, more expensive developments. It's the inevitable outcome of cost-versus-profit, a basic business principle that extends to virtually all development throughout the Las Vegas Valley, including the housing market.

Single-family detached homes have become more expensive year-to-year over the last decade, increasing more than 60 percent since 1990. Today, a new home runs $208,265 or $23,997 more than 2002.

And the new home lots are shrinking in size as well. Due to real estate prices, which are approaching, $300,000 per acre for raw land, some housing lots are only 2,000 square feet in size; whereas for the past 15 years, average lot sizes were between 4,500 and 6,000 square feet. As such, several developers are opting to build high-rise residential towers.

"There are currently 3,100 high-rise residential units currently under construction or planned for future development," says Brian Gordon, a principal with Applied Analysis, a Las Vegas-based economic research firm. "Most of these facilities are very site specific, centered around the Strip."

The resort corridor's proximity and accessibility makes high-rise homes attractive for hotel-casino employees who work nearby. Additionally, seniors seeking a secure low maintenance lifestyle as well as corporate travelers and second residence homebuyers could also find high-rise living appealing.

Although such luxury condominium/apartments can run from $250,000 up to $1 million, the cost disparity may soon narrow. Escalating new home prices, increasing at a rate of 1 percent per month, coupled with more affordable high-rise units could soon close the pricing gap.

"The current high-rise residential inventory is expensively price," Gordon says. "However, as new development goes denser, the cost per unit will become more economical. Eventually, it's going to become comparable to a single-family detached home and viewed as a substitute product that should gain in demand."

One such product is the $250 million, 876-unit "Vegas Grand," located at the northeast corner of Swenson Street and Flamingo Road in Las Vegas. Developed by Del American Inc., of Orlando, Florida, the 20-acre, five-building project will offer 1,190 to 3,500-square-foot homes priced from $200,000 to $750,000. Designed by JMA Architecture Studios, the Mediterranean-themed complex will consist of residential towers ranging from four-to-12 stories tall, combining for a total of 1-million square feet.

"A lot of our product will be affordable for the types of jobs being created," says Christopher DelGuidice, chairman and chief executive officer of Del American. "With the Las Vegas job growth and significant amount of new residents coming in from California, the price points we are targeting are affordable."

Slated to break ground in spring 2004, Del American expects to deliver the first Vegas Grand units in fall 2005 with build-out by 2007. Meanwhile, the project faces a deluge of competition from similarly priced high-rise towers like the $160 million, 250-unit "Panorama" tower.

The 30-story, 400-foot-tall building is being developed by Sasson Properties and Hallier Investments on 10 acres at Harmon Avenue and Industrial Road, behind the Bellagio hotel-casino. Sales for the 700 to 5,000-square-foot condominium units began this month with prices ranging from $245,000 to $1 million. Designed by Klai-Juba Architects, construction on the high-rise tower is expected to begin in April and finish by December 2005.

The $40 million, 65-unit "Metropolis," being developed by Houston-based Randall Davis, is situated on 1.36 acres at the northeast corner of Desert Inn Road and Debbie Reynolds Drive. Condominium units range from 930 to 4,500 square feet in size, and are priced from $400,000 to $1.7 million. The development is reportedly 50 percent pre-sold prior to breaking ground. The 18-story tower is tentatively slated to finish by early 2005.

Other offerings include the $700 million, 800-unit Turnberry Place, located on 15 acres at the northeast corner of Paradise Road and Riviera Boulevard. Developed by Turnberry Associates of Orlando, the first of four 40-story towers came online in 2000. The first three 436-foot-tall buildings each consist of 185 condominium units ranging 1,550 to 8,000 square feet, and priced from $550,000 to $5.25 million. "To date, more than 550 residences have been sold with sales in excess of $550 million," says John Riordan, vice president of Turnberry Place. "Towers one and two are completely sold out and the third tower is 80 percent sold."

Tower three is scheduled to finish in February, and work is expected to begin early next year on the final tower, slated to finish by 2006. Sales on tower four will begin in December. Unlike its predecessors, the final building will house 231 units, including a 1,200-square-foot one-bedroom unit priced from $425,000.

"We are receiving a tremendous response to the one bedroom floor plan," Riordan says. "Sales for the entire community have exceeded our expectations, and construction is about a year and a half ahead of schedule. We expect the remaining residences to sell very quickly."

Turnberry has also partnered with MGM Mirage for a proposed $800 million, six-tower condominium-hotel complex, located on 18 acres that formerly served as MGM's Adventure Theme Park at Flamingo and Harmon Roads. The 578-unit initial phase is slated to break ground in mid-2004.

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Article Copyright ©: T. Illia, Las Vegas Business Press