Apartment market holds steady in first quarter

Occupancy creeps up to 92.7 percent

May 19, 2008 - While most sectors of Southern Nevada's real estate market have suffered from the subprime mortgage crisis and rising foreclosures, the apartment market remained stable through the first quarter, a local brokerage firm reported.

Rent growth has slowed from previous years and occupancy rates are down, but the apartment market bottomed out in 2007, Bentley Group Real Estate Advisors President Chris Bentley said.

Occupancy crept up to 92.7 percent in the first quarter, compared with 92.3 percent in the previous quarter, proof that the multifamily market is recapturing residents previously lost to single-family home rentals, Bentley said.

Overall, the apartment market is holding up well and could lead the economic recovery ahead of the retail and office sectors, Patrick Sauter of The Sauter Cos. said.

He recently brokered the sale of the 32-unit Crossroads Apartments at 1110 Redwood St. for a premium price of $3.53 million, or roughly $110,000 a unit.

"The toughest thing is how single-family affects us in shadow rentals, when someone can rent a two- or three-bedroom house for $1,100 in Summerlin where an apartment is $1,300," Sauter said. "That's been a real drag on the market."

Applied Analysis, a Las Vegas-based financial consultancy, showed average asking rent of $888 a month in the quarter, a $1 increase from the previous quarter and up from $872 in first quarter 2007.

The 1.8 percent annual rent growth was the lowest rate since first quarter 2004. The highest rent was $1,016 a month in the valley's southwest submarket and the lowest was $771 in the northeast.

Brian Gordon, principal of Applied Analysis, said the latest performance measures suggest market corrections are under way within the apartment sector.

This "rebalancing" is expected to be short-lived as overall housing demand is expected to increase during the next 12 months to 24 months with a large share of newcomers seeking rental units, Gordon said.

Builders are projected to complete about 2,300 apartment units in Las Vegas this year and average rent is forecast to increase 0.9 percent to $862 a month, a first-quarter apartment research report from Marcus & Millichap shows.

Out-of-state investors, particularly from California, will continue to target apartment properties in Las Vegas, attracted by the city's long-term growth prospects, Marcus & Millichap regional manager John Vorsheck said.