HOUSING:

As apartment rents drop, tenants look for upgrades

VEGAS INC coverage

A decrease in rental prices in some high-end apartment complexes in Las Vegas has made older properties obsolete, according to Colliers International. That trend has paved the way for construction once the economy improves.

The decline in rental prices in so-called Class A (newest) and Class C (older) complexes prompted renters to move out of their apartments and into newer complexes.

That’s evidenced by the 6.7 percent vacancy rate in the valley’s Class A complexes and the 9.9 percent vacancy in the Class B complexes. In contrast, Colliers reported, the aging Class C properties have a 17.4 percent vacancy rate. Class C properties are offering large concessions to attract tenants, while some higher-end properties are starting to increase rents because of the high demand.

“Former homeowners and folks who rented in Class C projects are using the current rent climate to migrate into Class A and B projects,” said John Stater, research director at Colliers. “In the process of the flight to quality, some older properties are simply becoming obsolete.”

Some of those older projects are being condemned for health and safety reasons. That trend may continue for some time, Stater said. As many as 3,000 Class C properties could face demolition or substantial renovation, he said.

“This suggests that an improved job picture in Southern Nevada will spark a revival of multi-family construction, which has effectively been nonexistent for the past three years,” Stater said.

Costs are currently $7,000 per unit for raw land, and about $125 per square foot to build a Class A project, Stater said.

Investors bought 638 apartment units in the first quarter for an average price of $73,211. That’s down from 2,594 units sold during the fourth quarter at an average price of $74,734 per unit, Stater said.

The southwest valley had the lowest vacancy rate, 7 percent, as well as the highest rents, $726 for a one bedroom.

The northeast had the lowest rents at $500 a month for a one bedroom, Colliers reported.

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