Apartment rents flatten in 2008

Observer expects complexes to face competition
from condos, single-family rentals

June 23, 2008 - A souring economy, rising unemployment, and a housing downturn are negatively affecting Southern Nevada's apartment market. The valley reported flattened rent growth in the first quarter, along with rising vacancies, says Applied Analysis, a Las Vegas-based financial consultancy. Valleywide vacancies were 7.3 percent in the first quarter, same as the previous quarter, and 1.4 percent higher than a year ago, Applied Analysis adds.

Rents, meanwhile, have stayed flat at about $888 a month (99 cents per square foot) during the last six months. The southwest submarket commanded the highest rents at $1,016 a month; the northeast had the lowest at $771 a month. The north submarket had the strongest annual rent growth at 5.3 percent; the central/east submarket was poorest at a negative 0.4 percent.

"While current conditions remain somewhat challenging, the apartment sector is anticipated to experience a supply shortage during the next several years," Applied Analysis principal Brian Gordon said. "More dramatic demand for housing is possible starting in 2010, depending on the performance of land prices, construction costs and other factors."

While 319 units were absorbed in 2007, marking the fourth consecutive year of decline, the market's softening became evident in the first quarter with 1,678 move-outs, reports Hendricks & Partners, a national multifamily real estate specialist. And things could worsen in the future with 1,300 nonfarm jobs lost during the last 12 months, and a glut of new inventory, totaling some 2,725 units that came on line last year.

"Apartment properties will continue to face significant competition in 2008 from condo and single-family rentals," said Carl Sims of Hendricks & Partners. "The average apartment vacancy rate will remain elevated and is expected to settle at 7.5 percent by year-end, while in 2009, stronger employment growth and an absence of new apartment deliveries will help drive the average vacancy rate down to 6.3 percent. Average rent growth will range from 2 (percent) to 2.5 percent over this period."

PROJECTS

JP DiNapoli Cos. recently completed the $11.7 million, 202,000-square-foot Craig Corporate Park at Craig Road and Lamb Boulevard in North Las Vegas. The 12-acre industrial complex consists of five concrete tilt-wall buildings from 19,125 square feet to 51,750 square feet in size. Panattoni Construction is the general contractor, with Tectonics Design Group as architect. Sale prices range from $124 to $136 per square foot. Colliers International's Daniel Doherty, Patti Dillon and Laura Hart are listing agents.

Wells Cargo recently broke ground on $4.3 million worth of storm drainage upgrades along Tropical Parkway and El Campo Grande Avenue between Durango Drive and Butler Street. Improvements will also take place along Corbett Street between Butler and Janell Drive. The project is scheduled to finish in February 2009.

The Korte Co. recently topped-out a three-story, 101,000-square-foot addition to the Nevada Cancer Institute at 1 Breakthrough Way in Las Vegas. The $31 million expansion consists of a support service building with offices, labs and a 200-seat conference center, plus a five-story parking garage on 3.25 adjacent acres. American Nevada Co. is the developer. The project is scheduled to finish in early 2009.

MILLION-DOLLAR DEALS

Wynn Design and Development signed a five-year, $2.9 million lease for 76,000 square feet of industrial space at 6650 Spencer St. in Las Vegas. Voit Commercial's Kevin Higgins represented the tenant, and Prudential CRES-IPG's Dean Willmore represented the lessor, Spencer Street Investors LLC. The reported average rent equals 63 cents per square foot.

Peccole Enterprises bought a 6,000-square-foot office building at 145 E. Warm Springs Road in Las Vegas for $1.8 million, or $303.53 per square foot, from the Merrill Family Trust. ROI Commercial's Dan Adamson represented the buyer; Prudential CRES-IPG's Dean Willmore represented the seller.