Desert Boomtown
Those that already own land or multifamily projects in Las Vegas are riding on the coattails of the demand of a booming Clark County population that, according to the U.S. Census Bureau, between April 2000 and July 2005 alone grew 24.3 percent to more than 1.7 million people. Combine that with a total multifamily inventory of just 160,000 units and you get a current occupancy rate of 96 percent, up from 89 percent economic occupancy just three years ago.
Current rents range from an average 65 cents per square foot for Class C properties up to $1.30 per square foot for Class A units. Most predictions call for a rent growth of approximately 10 percent annually through 2010, which exceeds the 8 percent rent growth predicted for apartment properties in neighboring Southern California.
On the economic front, Las Vegas is equally enticing. In the most recent report by the Nevada Development Authority, the region in fourth quarter 2005 attracted 643 new jobs from 15 new companies. New casinos, each of which adds an estimated 6,000 to 8,000 new jobs, also helps Vegas maintain its low 3.7 percent unemployment rate.
Cost Pressures
In a place like Vegas, everything strives to be extraordinary, and multifamily projects are no different.
The planned $7 billion mixed-use CityCenter by MGM Mirage is being touted as the biggest and most expensive construction project ever attempted on the Strip. Plans call for 2,800 condo-hotel and condominiums, a 4,000-room resort-hotel-casino and more than 500,000 square feet of retail space. Phase one construction started in April.
The nearby $300 million Trump Towers hotel-condominium project also is under construction and slated to open in late 2007. Units range from 636 square feet up to more than 10,000 square feet, with prices of $702,000 for a studio unit up to more than $2.5 million for a penthouse.
“Values on the Strip have become so extraordinary, most expect strip owners will continue to convert the land on Las Vegas Boulevard to hotel-gaming–at any cost–until it is gone,” says Schmidt.
But that’s not the whole story. What is frustrating many Las Vegas multifamily developers right now is the knowledge that renter demand exists, but their ability to afford land and construction costs to deliver a building that meets that demand does not.