Before investing in any market there are many factors to consider, and each investor will have different evaluations. Combining general information like population, demographics, income, and real estate market data like comparable sales and rental rates will help you determine whether it’s time to buy, sell, or hold on to a property in that market.
Multifamily assets are always a desirable investment simply because there will always be a demand for them with people always needing a place to live. We’ve identified six current market statistics in Las Vegas that are pointing to an upcoming demand in multifamily assets.
- Growing Population
The Clark County population is currently 2.146 Million people. Data shows that within the next 35 years Southern Nevada will experience a positive growth of population and stabilization of economy. The Center for Business Economic Research, Southern Nevada Regional Planning Coalition, Regional Transportation Division, and Southern Nevada Water Authority together have released a long-term population forecast estimating that the Clark County population will reach 2.78 million people by the end of 2035 and 3.11 million people by the end of 2050.
- Migration & Aging of the Population
The increase in population in Las Vegas can be explained by the migration of people to the Las Vegas area due to growing job opportunities in entertainment, medical, construction, and technology. The unemployment rate is 6.8% and continues to drop, and a salary increase is expected once the unemployment rate reaches the national standards bottom. Other reasons people are choosing to move to Las vegas include: warm and dry climate with lots of outdoor activities, entertainment offered by top notch casinos, a relatively low cost of living, tax advantages (no state income tax), and a growing medical industry.
Another factor influencing the demand for multifamily is a natural aging of the population. The majority of Millennials (born 1977-1995) are choosing to rent apartments. Meanwhile with quickly increasing numbers in the senior population there is a demand for senior apartments, as well as senior care facilities.
- Vacancy Rates
It’s important to know the city of Las Vegas is still being built and more inventory continues to enter the market, thus increasing rental rates. According to statistics provided by REIS, multifamily vacancy in Southern Nevada has decreased in the second quarter of 2015. Vacancy stood at 4.7 percent in the second quarter, 0.8 percentage points lower than one year ago, and 0.4 percentage points lower than in the first quarter of 2015. Class A properties were 5.1 percent vacant in the second quarter, 0.3 percentage points lower than last quarter. Class B/C properties were 4.4 percent vacant, 1 percentage point lower than last quarter. Again, this suggests that demand for multifamily assets is strong across the board, and promises success for new multifamily developments.
- General Statistics Based on 2015 Sales
The numbers below depend on location of the property, year built, condition and occupancy rates.
Class A properties go for $120K-180K per unit, driving cap rates generally between 5%-6%. Rents range between $1200 & $1500 per month.
Class B properties go for $80K – $120K per unit, with cap rates between 6%-7%. Rents range between $900 – $1200.
Class C properties go for $50K – $80K depending on area, with cap rates at 7%-8%. Rents range between $450-$750
- The City of Las Vegas Layout
As the city is being built from the center to the outskirts, new development continues appearing in the suburbs of Las Vegas which are forming new competitive communities. We see older developments, class C properties, concentrated in the geographical heart of the city, which are circled by Class B properties, with Class A continuously moving towards suburbia.
- Short Term & Long Term Investment Strategies in the Las Vegas Area
There are increasingly fewer opportunities for investors looking for short term “fix and flip” properties as the market stabilizes, economy matures, and because of the way the city is built (there are no class C properties in class A areas). The inventory of multifamily assets under 100 units is limited to class C value-add properties, along with some B- properties. Las Vegas has a large inventory of 100+ properties which fall into categories B and A.
New construction is focusing on large 200+ unit properties due to two factors:
New construction slowed down since the market crashed in 2008 to 2011.
Developers find it cost efficient to build large communities at once.
Given the current stats, the Las Vegas multifamily market is conducive for long term buy and hold types of investors, who are looking to generate cash flow, use tax advantages, and sell the property with 20-30% increases in value depending on the market.
For sales and rental comps, financial analysis, and investment opportunities off market contact Fortis Commercial Advisors here: Fortis Contact
About the Author:
Nataliia Cohen, Leasing Associate
Nataliia is a Commercial Real Estate agent working with multifamily assets with Fortis Commercial Advisors which she joined in 2015. Nataliia has an extensive real estate background including development and construction in the residential and commercial property sectors since 2010.