Wednesday, September 12, 2007

Multi Family Investors Shifting Focus To Vegas

Multi family investors have become very interested lately in the Las Vegas investment market because supply - due to condo conversions and demolition for redevelopment and population growth - has not been keeping up with demand for the last three or four years, creating a ripe market. As a result, occupancies are running in the high 90% range and rents are rising at a 4% annual clip, a trend that is expected to sustain itself given subprime mortgage meltdown and the fact that while supply is catching up with current demand, it is not catching up with the backlog from previous years.

Condo conversions have taken 20,000 to 21,000 rental units off the market and redevelopment has taken another 6,000 to 7,000 units. Major local rental operations are running as high as 96 to 97% occupied.

Historical multi-family construction deliveries for the Vegas Valley average 7,000 to 8,000 units per year, with absorption tracking pretty closely. In 2005, however, new supply was negative by up to 4,000 units. And while 2006 didn’t see negative supply, it also didn’t keep up with demand and the same will be true for 2007, according to local market reports. The inability of many potential first time buyers to purchase homes due to the sharp decline in available mortgage funds, the huge projects being developed that are attracting construction workers to the area and the average price of Las Vegas homes, make the Vegas Valley a prime candidate for multi family development in the foreseeable future.