Apartment rents drop to 2006 levels

By Buck Wargo

Fri, Jun 5, 2009 (3 a.m.)

The number of people renting apartments in Las Vegas fell to a level not seen in more than a decade and, as a consequence, rents are falling to where they were in 2006.

Las Vegas-based consulting firm Applied Analysis reported that rents requested by landlords in the first quarter couldn’t keep pace with 2008 and show no sign of improving.

By the end of the first quarter, the occupancy rate was 91.3 percent, which was a decrease from 92 percent in the fourth quarter.

That’s the lowest reported occupancy rate in more than a decade and well below the 10-year average of 94.3 percent, the firm reported.

The growing unemployment rate and reduction in home prices has made apartment rentals more challenging, said Applied Analysis Principal Brian Gordon.

“The impact of the current recession has affected the apartment sector, and will likely continue to put downward pressure on effective pricing and occupancies,” Gordon said. “A bottom and ultimate recovery in the single-family market will put a bottom in the apartment sector in sight.”

Jack Joyce, an Applied Analysis project manager, said lower rent payments compared to 2008 are likely to continue through the rest of the year because of a slowdown in population growth. In addition, the job market and foreclosures continue to shape the apartment market, he said.

Because apartments are the preferred lower-cost alternative for those who lose their homes because of foreclosure or job losses, that will keep occupancy rates from falling too far, Joyce said.

“While the apartment market is not in the clear yet, its ultimate recovery will likely precede improvements in other segments of the economy,” Joyce said.

From a rent standpoint, the prices of units dropped to levels not seen since the first quarter of 2006, Applied Analysis reported. The average asking price was $868 per unit, which was 2.4 percent below the $890 per unit price a year ago.

During the past three months, the average rental rate dropped from $881 per month.

The highest rent charged in the first quarter was the southwest, which averaged $1,007 per unit. The lowest rents were paid in the northeast at $752 per unit.

The other rental rates across the valley: southeast, $970; north, $907; west, 873; northwest, $859; central/east, $792; and south, $863.

Rents are falling fastest in the northwest, recording a 3.5 percent decline on an annualized basis.

No area of the valley had a lower occupancy rate than the north at 87.9 percent, the firm reported.