Apartment occupancy dips due to economy, unemployment

By Brian Wargo (contact), In Business reporter

Fri, Feb 20, 2009 (2 a.m.)

Job losses and the poor economy have lessened demand for apartments, and the Las Vegas occupancy rate dropped to its lowest point since early 2003, according to a report by Applied Analysis.

The occupancy rate was 92 percent at the end of December, down from 93.7 percent at the end of September. In 2006 the average occupancy rate for the year was 95.4 percent.

The drop in demand has prompted apartment owners to lower rents, which fell to an average of $881 a month in the fourth quarter, down $9 a month from the third quarter.

Applied Analysis Principal Brian Gordon said the weak economy and rising unemployment are to blame and suggested the occupancy rate and rents will decline more in the coming quarters. The occupancy rate could fall below 90 percent, he said.

Apartment owners haven’t been helped by the housing market, whose falling prices have lured away tenants and prompted rental cuts to stay competitive.

To remain competitive in 2008, rents dropped 1 percent from 2007, which is the first decline in nearly a decade, Gordon said.

Fewer people are moving to Las Vegas and more people are moving out, and the slowdown in the economy has prompted some people to move in with family members and others to look for roommates, Gordon said. .

“If we take a look at year-over-year, overall employment is down about 15,000 and unemployment is 9.1 percent,” Gordon said. “The community is dealing with an environment it is not accustomed to, and it is having an effect on the residential market, including apartments.”

The dynamics are affecting the apartment investor market, Gordon said. The tight financial market, softening rents and a handful of projects that remain underwater will reduce prices, he said. There have been few, if any, transactions in the past several months, he said.

Among the highlights during the fourth quarter:

• The highest average rents per unit were in the southwest valley at $1,029 per month. The lowest were in the northeast at $762 per month. The northwest was $877; central and east were $803; and south was $879. The north had $912, west $882 and southeast $985.

• The biggest percentage growth in rental properties was in the southwest at 1.6 percent, while rents in the northwest fell 1.8 percent.

• The highest occupancy rate was in the south at 93.4 percent, while the lowest occupancy rate was 89.1 percent in the north.