Numerous factors giving apartments boost in rates

Jennifer Shubinski

Tuesday, June 8, 2004 | 11:25 a.m.

A strong local economy, a shortage of available developable land and apartment-to-condo conversions are giving the local apartment market a boost in selling prices and rental rates.

The overall economic and rental climate in the Las Vegas area continues to stimulate demand for apartment properties as investors scramble to get a piece of the market, a report released Monday by Marcus & Millichap Real Estate Investment Broker Co. detailed.

"The apartment market will continue to benefit from job growth and strong net in-migration as vacancies tighten further by year end," said Christopher LoBello, regional manager of the firm's Las Vegas office. "Construction activity is forecast to fall lightly and absorption is expected to increase."

Apartment-condo conversions have helped spur higher prices for apartment complexes and helps apartment vacancies by decreasing the number units in the rental pool.

There are currently at least 13 projects, or about 2,400 units, in varying stages of the conversion process, primarily consisting of newer, well-amenitized properties, although well-located older properties are also being sought for conversions. Another 8,000 units slated for conversion are in the planning phase.

Prices for apartment complexes are expected to continue their upward trend after the median price per unit jumped 15 percent in 2003, to $46,000 per unit. Owners of higher-end properties have been eager to sell to condo converters, who often pay top-dollar for some properties, according to the report.

Prices of some properties in Henderson and newer areas west of the Strip, both highly desirable locations, are approaching $100,000 per unit, the report detailed.

Some recent sales include Silver Shadow, 3301 W. Charleston Blvd. for $14 million, or $70,000 per unit, Traverse Point, 45 Maleena Mesa St. in Henderson, for $23.68 million, or $80,000 per unit and the Cottonwood, 3149 E. Desert Inn Road for $6.18 million, or $48,281 per unit.

Highly sought after land has all but disappeared, leaving apartment builders with no place for new projects. Many of the apartments already under construction have been planned for years, and the development pipeline for apartments is at its thinnest in almost a decade and will likely continue to decline, according to the report.

As a result, the high demand for apartment units will push asking rents to 2.2 percent by the end of the year, to $738 per unit, the largest increase in four years.