Las Vegas Apartments Projected to Lag National Forecast

Realtors Commercial Alliance - RCA; Washington D.C.

The fundamentals remain healthy for commercial real estate according to the latest COMMERCIAL REAL ESTATE OUTLOOK of the National Association of Realtors. NAR Cheif Economist Lawrence Yun said commercial fundamentals are essentially sound. "Although vacancy rates remain relatively low for all sectors, they are expected to rise slightly in the office and industrial markets during the coming year because much of the space being absorbed is in high-quality buildings or is built-to-suit," he said.

Reading further into the report regarding the multifamily market. The apartment rental market - multifamily housing - is experiencing increased demand from the slowdown in home sales. With a rising population and growing number of households, vacancies are tightening and rents are rising.

Multifamily vacancy rates are projected to average 5.4 percent in the current quarter, down from 5.9 percent in the fourth quarter of last year, and then continue to decline to 5.1 percent by the end of 2008. Average rent is likely to rise 3.1 percent for 2007 and 3.8 percent in 2008, following a 4.1 percent increase in 2006 according to the report.

Unfortunately, Las Vegas apartment rents are projected to be flat for 2008. With over 25,000 SFRs still on the market and nearly 50 percent are vacant looking for renters. Its difficult for new projects to push rents.

Nationwide, multifamily net absorption is expected to total 229,500 units in 59 tracked metro areas in 2007, below the 234,400 last year, but should rise to 245,800 in 2008. For Las Vegas, absorption continues to lag with only 474 units absorbed versus the 1,538 units constructed in the 4Q2007 for a construction/absorption ratio of 3.2 as reported by REIS.

The areas with the lowest apartment vacancies include Northern New Jersey, Salt Lake City, San Jose, San Diego, Nashville and Philadelphia, all with vacancy rates of 3.3 percent or less. In comparison, Las Vegas is expected to increase in vacancy from 6.1 percent in 4Q2007 to above 6.5 percent in 2008 according to the lastest REIS Report.

Multifamily transactions in the first 10 months of 2007 totaled $62.3 billion, nationally, compared with $87.4 billion for all of 2006, or nearly 29 percent drop in sales. The Las Vegas market experienced similar market conditions.