Downturn in Multi-family. Multifamily is suffering as all other segments of commercial real estate are. While over the long term, the multifamily sector has consistently outperformed other property investments while experiencing less volatility, this downturn in the economy has affected this sector as well. Gone are the days of "easy money" when even marginal investment decisions yielded positive results.
Tomorrow’s success stories will be written by investors who have the expertise to combine macro-economic research with a thorough understanding of local market environments.
The recent boom in the Las Vegas real estate market had dramatic effects on apartment availability and rental rates. Due to demand, over 10 percent of the valley's apartment properties were converted to condos for purchase. Few new apartments are being built or have been built in the last 3 years. This has created a very favorable climate for clients buying multifamily with good upside potential.
Foreclosures affect the Market: Residential foreclosures have affected the market first by flooding the apartments with displaces former home owners. Now as there are more and more vacancies being offered up for sale in single family homes, they compete with apartments. Apartment leases are down from last year due to supply and demand.
- Class A
Communities characterized by newer construction in emerging neighborhoods with abundant amenities (within the community and units), including technology, security, parking facilities and other high-end qualities.
- Class B
Communities characterized by average construction quality providing average amenities (within the community and units) and average features.
- Class C
Communities characterized by older construction, moderate to poor physical appearance typically located in more mature parts of the Valley and in need of some refurbishment measures.
Average Rents: Average asking rates are based on those provided by on-site property managers or other third-party sources. By the close of 2009, the Las Vegas Valley apartment market was flat with average asking rents at about the same levels as the year before. Ocupancy levels have been somewhat stable and a little above historical norms.
Average rents in Las Vegas were $825 per unit per month, with units averaging 901 square feet. On a per-square-foot basis, rents reached $0.92 per month. Average rental rates were up 6.0 percent over the same quarter of the prior year, maintaining a growth rate well above historical averages. In addition to upward pressure on pricing, supply additions remained modest and vacancies remain at just over four percent..
Class B apartment communities posted average asking rents of $824 per unit, representing a 5.2-percent increase over the prior year. Occupancy levels remained healthy, yet slightly below the prior year. As of year-end, occupancies averaged 95.3 percent, compared to 95.9 percent during the fourth quarter of 2009.
In the Class C sector, rents averaged $706 per unit, which was up from the 6.6 percent from the $662 reported during the same quarter of the prior year. Occupancy levels improved during the last quarter of 2005, reaching 96.0 percent from 95.8 percent one year ago.
In this economy, as a tenant, don't be afraid to ask for a month's free rent. As a property owner, work with your teants to keep them happy and in place. Otherwise you may loose several months rent and be forced to make further concessions!