Conditions in the Las Vegas apartment market appear very challenging over the next one to two years. According to the most current CBRE statistics (April 2009), the overall physical vacancy in the market is 10.31%, which is up 2.28% from the 8.03% vacancy one year earlier*. This latest rate however is a slight improvement over the past year’s peak vacancy of 10.96% in December 2008. Of all apartment market categories, the higher vacancy sectors are Class B and Class C communities with 11.1% and 12.16%, respectively. Class A apartments are still performing relatively well with a vacancy rate of 7.70%. Average asking rents for Las Vegas apartments fell 1.4% over the first quarter to $868/mo. or $0.97/s.f. according to the latest Applied Analysis market report. There are still selected submarkets in the Las Vegas Valley that are performing relatively well. According to the Second Quarter Marcus & Millichap 2009 Apartment Research Market Update, the Spring Valley submarket had a vacancy rate of 5.1%, while the University submarket exhibits a relatively healthy 7.5% vacancy rate**.

Even with the issues concerning vacancy rates and flat rents in Las Vegas, attractive financing is still currently available. The most active and aggressive lenders for any form of commercial real estate are the government sponsored agencies, Freddie Mac and Fannie Mae. Also, the FHA/HUD programs continue to offer great financing terms that, in some cases, provide more proceeds than either Freddie Mac or Fannie Mae. For apartment properties that may not meet the criteria for FHA, Freddie Mac or Fannie Mae, life insurance companies and banks are still active market players.

Even though the Las Vegas apartment market is currently under stress, there are some signs that it may bottom out later this year and begin to make a comeback. Currently the single family home rental market, condo rental market, and apartment market are all in competition with each other. The drop in value of single family homes and condos has resulted in generally declining rents in all sectors over the past year. Once single family home prices find an equilibrium and job growth returns to the Las Vegas Valley, the multifamily rental market should rebound. The expected completion of MGM’s City Center project in the fourth quarter of 2009 and improving economic conditions should create the positive dynamics for the multifamily market recovery in 2010.

* CB Richard Ellis Apartment Vacancy Survey
** Marcus & Millichap Second Quarter 2009 Apartment Research Market Update