Las Vegas apartment rents staying level despite slow economy

Grace Leong

Tuesday, Dec. 18, 2001 | 10:46 a.m.

Many Las Vegas-area apartment management companies are managing to keep rental rates stable amid a softening economy and higher vacancy rates.

The average monthly rent for the third quarter this year in Las Vegas was $753, compared with $757 in the second quarter and $741 in the third quarter of 2000, the real estate brokerage CB Richard Ellis reported.

Average monthly rents for a 695-square-foot one-bedroom unit were $634 and were $756 for a 957-square-foot two-bedroom unit. Monthly rents for an 1,179-foot three-bedroom apartment averaged $918, said a CB Richard Ellis report, which was based on a study of about 100,000 of the market's 165,000 apartments.

Many companies say they would rather help laid-off tenants by allowing them to pay rents in installments or transferring them to lower-cost apartments than cut rents. And to woo new tenants, they are offering more concessions including move-in specials, cutting application fees and waiving security deposits for prospective tenants with good credit.

Bruce Monzulla, president of Las Vegas-based Realty Management Inc., which manages 32 apartment complexes or 8,000-9,000 apartments in the Las Vegas area, said: "We're trying not to overreact or over-respond to the situation. Assistance to our tenants is offered on a unit-by-unit basis."

"For existing tenants who've been laid off and have difficulty paying, we're referring them to five or six agencies for rental assistance. We're trying not to evict them. But we have to be careful not to discriminate in, for example, waiving late fees for one and not for all," he said.

Monzulla said the average occupancy rate at Realty's "Class C" properties -- apartments that have only basic amenities -- is higher than that in its Class A and B properties, which typically have garages, covered parking and microwave ovens.

"That's because people in the Class C properties aren't moving due to the relatively low rents and there's more movement of tenants from Class A to Class C properties," he said. "Monthly rents for a Class A property are about $800, while those at a Class C property are about $550."

Meanwhile, apartment vacancies in the Las Vegas area in October jumped to 7.2 percent from 6.25 percent in September, due to the layoffs after the September terrorist strikes and low interest rates that prompted more apartment renters to become homeowners, said the CB Richard Ellis report.

While October's apartment vacancy rates are higher than expected, these are still off from a historical high of more than 9 percent last seen during the recession in 1991, said Spencer Ballif, CB Richard Ellis' first vice president.

"Although this near 1 percent increase in vacancy was reported, there are still communities that feel the overall market vacancy might be somewhat higher as some properties have been hit harder by the tragedy of Sept. 11," he said.

"October is the month where the after-effects of Sept. 11 is seen because the casino lay-offs didn't happen until a few weeks after the attacks and September's rents were already paid by Sept. 5," he said.

Pecos Terrace, a 186-unit apartment complex in North Las Vegas that's owned by Pinnacle Realty Management Co., said it saw occupancy rates drop to 65 percent in November from 72 percent in October and a rise in the number of tenants defaulting on rents.

Martha Jimenez, Pecos Terrace's apartment director, said: "About 16 percent of our tenants are casino workers. Four tenants skipped rents for November compared with two in October."

"We're helping tenants who were laid off by allowing them to pay rents in two installments or extending the payment date to the fifth from the first of the month," Jimenez said. "We're also offering concessions like a $300 move-in special for the first month that also serves as a security deposit."

But Jimenez said she's seen some improvement.

"Since we advertised the concessions, we've attracted about 10 prospective tenants in the last three weeks, compared with about five, maybe, for October."

Ballif is also optimistic. He said he sees November's vacancy rates improving slightly to the high 6 percent range because of new jobs generated by new casinos like Palms and Green Valley Ranch Station Casino, fewer layoffs and a recovery in hotel occupancy rates. November's numbers are due this week.

Some apartment complexes managed to escape the economic fallout of the attacks.

Elizabeth Morrissey, manager of Meridien at the Hughes Center, a 678-unit luxury apartment complex owned by San Diego-based apartment management company CONAM, said: "We were initially extremely nervous because nobody was looking for apartments immediately after the attacks. Visitor traffic slowed down but the situation has improved."

Meridien said its new tenant applications for October were at 30, unchanged from September.

"The majority of our tenants are attorneys, doctors and dentists and they generally make a good salary. We were more concerned that they would move out to buy houses, but there's been no significant change," she said. "Many of our tenants consider the apartment as a second home because many of them are here doing business, their home is actually out of state. And we have a lot of retirees who prefer to rent rather than take care of a home."

Meanwhile, some industry analyst and companies are divided over whether apartment construction has slowed down.

Ballif said he sees fewer new apartment complexes being built next year because "it's harder for developers to obtain construction financing due to lower projections of job growth and fewer people moving into Las Vegas."

He said fewer than 5,000 apartments are expected to be built in the Las Vegas area in 2002, down from 5,300 units this year.

But Realty Management's director of development Martin Egbert disagreed.

"Sales of apartment sites and their prices, which average about $11,500 to $12,500 a unit, haven't dropped. That would have been a real indicator of consumer interest."

"The situation about apartment construction slowdown may be true for smaller real estate companies but we haven't been told by our banks that we shouldn't be building more apartments. The city is still growing and my impression is that the job layoffs are just temporary."

Realty Management said it expects to complete construction of some 1,600 apartments in the Las Vegas area by mid-2002.