ACCESS LASVEGAS FEBRUARY 2009 | MARCH 2009
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When Will The Dust Settle? Tough Times Continue To Plague Las Vegas This is not just a place where people are born and live. Las Vegas is an enterprise.
And so, it has been a shock as, quietly and slowly, everything has changed.
It is a deal people enter, a set of givens agreed upon: More is better. Biggest is best.
Like many U.S. cities, Las Vegas is watching its economy reel. Home values have plummeted. Foreclosures have exploded. Unemployment is the highest it's been in at least 25 years, an unprecedented 9.1% (8th highest in the nation, 126,000 out of work).
To live in Las Vegas is to stake your future on this enterprise -- for better or worse. For the last 20 years, it has been for better. The unemployment rate was minuscule. Gleaming new casinos were built on "old" casinos like so many sand castles on a beach. Hundreds of neat stucco houses promised a palm tree or a pool or both for nearly everyone with a paycheck.
For the first time in decades, the population has stopped growing. Casino projects are on hold. Planes full of free-spending tourists are landing with less frequency. Long the embodiment of American confidence, the city is now in limbo.
In Las Vegas, average people are versed in the statistics that impress relatives from back East and testify to the success of this enterprise: 39 million visitors, almost 140,000 hotel rooms, 10 new schools a year. It was a place that not only believed its own hype, but depended on it.
The bottom line is we are in the midst of the worst economic downturn in several decades and it is here to stay. Las Vegas will recover, but it will not be as soon as we would like. When will Vegas recover ... only time will tell but it will not be in 2009, nor 2010 at this point!!!
ACCESSLASVEGAS February 2009 | March 2009
SPECIAL REPORT: Economic Crisis Signs Are Dim, But Is Vegas’ Future? Experts admit we’re in a deep downturn, but envisions a rebound eventually Source: Sam Skolnik, Las Vegas Sun
Back in July four economic and home construction experts gathered by the Las Vegas Sun sat down to discuss challenges facing Southern Nevada -- what’s gone wrong and where we’re headed. Access Las Vegas wants to rehash the transcription of what was divulged by these four experts in this deep economic crisis. It is that relative to what is happening right now and was discussed over 6 months ago. This is a must read for anyone who has anything vested in Las Vegas. The participants for the conversation were: • Jeff Hardcastle, the Nevada state demographer. • Jeremy Aguero, a principal analyst with Applied Analysis, a financial advisory and economic consulting company. • Dale Gibbons, chief financial officer for Western Alliance Bancorporation, parent company of Bank of Nevada. • Dennis Smith, president of Homebuilders Research Inc. and a member of the Southern Nevada Homebuilders Association. The discussion was held in late July right before Boyd Gaming’s decision to pause construction on Echelon for up to a year, which will only exacerbates the economic challenges faced by Southern Nevada.
“Job diversification is important because it helps cushion the loss of residential construction jobs. We’ve seen 15,000-plus jobs lost in the Las Vegas economy in the last few years ... ” - JEFF HARDCASTLE NEVADA STATE DEMOGRAPHER
The remarks by this roundtable participants have been edited for space and clarity. Jeremy Aguero, with Applied Analysis: The economy is the worst it’s been in 30 years. It’s reminiscent of the economy of the early 1980s.
the past 30 years. The cycles are dictated mostly on the opening of major hotels and casinos. Although we have diversified, we are among the narrowest economies in the United States. One in every 10 jobs created (has) been in the hotel-casino industry, and 50 percent of our employees are dependent on two industries: tourism -- including hotels and casinos -- and construction. Both of those are cycling down concurrently, and that’s creating a unique circumstance. Dale Gibbons, chief financial officer for Western Alliance Bancorporation: Clearly there was a situation where we were riding quite high. If you look at any five-year period, going back three decades, Nevada has been the fastest growing state in the country. Now we’re No. 1 in the foreclosure rate, and we’ve recently shown the steepest declines in home values. So I concur that things are on the downside. But we still have population growth in excess of 3 percent, which is extraordinary compared with the national average. Jeff Hardcastle, state demographer: The fact that we have a monopolistic industry, gaming, plus housing, available water and easily developed land, especially in contrast to California, is important. Job diversification is also important because it helps cushion the loss of residential construction jobs. We’ve seen 15,000-plus jobs lost in the Las Vegas economy in the last few years, primarily in the construction sector.
The question is whether this is part of a cycle, or have we hit some mythical tipping point? If you look over the history of Southern Nevada, it’s pretty clear Aguero: We’ve lost 10,000 jobs in the private sector. that we run in very well defined cycles. We have for That means we’re going to have less in-migration. 2
It happened during the early 1970s, the early 1980s, the 1990s, and during the time leading up to September 11.
Hardcastle: You do have projects for job creation that will be coming on line. But I think there are a few things that could throw a big monkey wrench into the whole thing.
The reality is, fewer people are moving into Southern Nevada today and more people are moving out of Southern Nevada. And the reality is, we have a less robust economy.
To fill those jobs, you need to see some serious in-migration in the next year or two, or have unemployed people move into those jobs. And we have a fairly high unemployment rate right now, so some of those people may be absorbed.
We’re developing office space, industrial space and retail space for the next 100,000 people moving here. But if those 100,000 people don’t come, we’ll see rising vacancy rates, like the office market that’s currently almost 17 percent vacant. Dennis Smith, president of Homebuilders Research: The homebuilding industry is in hibernation. Homebuilders have not given up on Las Vegas. They’re just adjusting to the current situation. The housing cycle is nothing new. But this situation may be unique because first we had a housing oversupply, and then we had credit problems. The Las Vegas situation seems much worse than it likely is. Because if you look at some of these other so-called hot markets around the country, you’ll find that most of these other markets are in much worse shape than we’re in, in terms of supply. We’ve got people who are moving away from Las Vegas for strictly economic reasons. They’ve lost the wealth they believed they had in their houses. Things will change here, but it’s going to be a longer fix than most people in Southern Nevada are accustomed to. I see an extended recovery period.
SPECIALREPORT Smith: I think the new home segment has pretty much bottomed out, and it will stay flat for months to come. And the resale segment is softening somewhat, and will continue to soften. As a result, prices will lower in that segment. Frankly, the prices for new homes are as low as they’re going to get. Builders can’t build them and sell them for any less. It’s that simple. The supply of new, unsold homes in Las Vegas is low -- less than 1,000 units. You can’t say that about resale. The resale segment is going to continue to grow because of the credit situation we have today. I don’t think the housing turnaround that Las Vegans are accustomed to seeing is as close as most would hope.
Gibbons: We’re being affected because we’re a high-growth market but now fewer people are moving here.
Aguero: But we have something in our hip pocket. Unlike other markets in the United States, we have $36 billion worth of construction going on in our core industry, gaming.
Aguero: We got to an inventory of 30,000 unsold new homes when we should have had only 13,000. The worst case scenario would have been if we had gone up to 50,000 to 60,000 available homes.
Encore is going to open up here by the end of the year -- that’s 5,300 jobs. CityCenter is worth another 15,000 jobs. You have Fontainebleau -- another 8,000 jobs, plus or minus, coming down the pipeline.
If homebuilders had continued along with that production pattern, and it ended up there wasn’t enough demand for those excess houses, we would have had a much worse problem than we now have.
I’m not here to suggest that every one of those jobs will necessarily materialize. But I don’t think you can point to many other markets with that level of investment in their core industry.
So you’ve got this potential drag on getting workers in, plus you’ve got an uncertainty with fuel prices and airline prices, which is discouraging travel. The big question is, what comes after the big projects underway are concluded? What happens to those people with construction and other building-trade jobs? Gibbons: I think the amount of projects going on the Strip is a huge pull. And that pull will be met. These are going to be relatively well-paying jobs. I don’t expect our unemployment rate to rise more than what we’re facing today. Granted, we will see a reduction in construction jobs at that point. But once these projects come on line, I’m pretty sanguine about the future. Aguero: And as bad as it is right now, you’ve got to be encouraged about the number of applications that (Steve) Wynn’s already receiving on his Encore project (which is now open). I think we should look at the lulls that we had before the opening of the Mirage in 1989, before the opening of MGM Grand in the mid-1990s, and before the Bellagio and Venetian opened. You can compare what’s happening now to the lulls in any of those periods, though they may not have been as deep. Gibbons: At the same time, I think you’re going to see some pent-up demand in terms of housing. And I think the rental market will end up being stronger. Aguero: There is no community that has added as many employees to the market in the past decade, or that has added as much population per capita in
ACCESSLASVEGAS February 2009 | March 2009
the past decade. Likewise, there is no community that built the number of houses per capita in the past decade.
the downturn while we can. The market is fixing itself. It will take time, but it will fix itself.
There is no community in the United States that added more personal income from the past decade. That’s where we are today.
Population shifts are another thing. Twenty four months ago, Dennis and I were in front of a committee on housing, and they were berating us for a lack of affordable housing.
We’ve got an attractive tax structure, and we’re still marketable to retirees. I don’t think there’s another market with the same level of per capita in-migration of retirees.
But the answer is not going to be affordable housing. It’s going to be housing prices if we can’t sustain growth.
These fundamentals all still apply. Nationally, it’s still gloomy, and people are taking fewer vacations than has been the case in a long time.
But if the perception is that we’re at this tipping point, that we’re no longer a great place to live, or to come and visit -I think it would be wrong to draw that conclusion. Smith: As far as bottoming out, I think we are seeing that as far as the housing market.
Aguero: I sort of have a free market attitude like Dennis. We have the ability to see that we’re in a cycle and bring the fire trucks up to the front, understanding that the other side is worse.
One realtor said that while foreclosures are happening, the type of properties that are for sale are “good properties,” and have had multiple offers. I’ve heard about lots of situations where properties are being sold for more than list price. I spoke to a person yesterday who said he made an offer at list price but lost out to a person who offered $30,000 over that price. So while we have properties that are selling for list price, it appears we are starting to establish a higher price level for those properties. If you want to gamble on prices still dropping, go ahead. But today I know that the prices are as low as they’re going to get in most instances. And I also know that the interest rates are going up. I would rather take a lower interest rate and get a low price that I know is a good price today, than wait to see if it might go still lower. It could go lower because some of the foreclosures in the resale situation, I agree. But I would suggest that now is as good a time as any. I can’t say it’s going to get better. The market will take care of it. Let the business cycle go. It will take care of it itself.
If you’re sitting in the shoes of the state Legislature or the government at large, I think the reality is that cycles run. I think the government needs to recognize two things: One, that revenues increase very rapidly, and two, they decrease very rapidly. If we can recognize that, I think we can be better prepared the next time it happens, because it will happen again. Smith: Hopefully someone, somewhere can learn from history. Have we learned enough? Probably not. Aguero: Is Las Vegas recession-proof ? That was the question everybody asked for a long time. And the answer to that is “no.” That’s never been true. If you look at our history, we’ve been resilient and resourceful through a handful of recessions. And I think locals would argue that we’ve come out stronger each time -- something that’s unique to Las Vegas. Southern Nevada’s narrow economy, dependent on two industries, tourism and construction, was uniquely positioned to be hit hard. So, we ride it out by relying on what made us the most successful economy in the United States in the past 20 years. We build on these fundamentals and we try to take steps to mitigate the pain of
What will that mean in terms of a loss of equity? Hardcastle: There are questions regarding wages, not just housing prices. National Public Radio had a story recently saying that Las Vegas was the mortgage default capital of the country. The problem is not just pricing got driven up by speculation -- but also wages. For casino workers looking to make a good wage, to get into a Mirage or a Bellagio, say, you have to work your way up. The El Cortez, the type of place where lots of casino workers start out, doesn’t pay as much as the Mirage. So we’ve got an imbalance of income. Aguero: But you are going to get paid more in the construction and tourism industry in Las Vegas than almost anywhere else in the United States. And the cost of living is substantially higher in other places, too. Hardcastle: There are people moving here who think they can easily make a great wage, but in reality there’s a wide range of incomes here. We hope people continue to move here. If you don’t have workers who are trained or the capacity to train them, we’re going to have to import those workers and have the facilities to train them. Aguero: I’m bullish on Las Vegas. I don’t have a crystal ball, but if history is any kind of a guide, I like our chances in the next five years. Smith: The optimism in Las Vegas is not as shiny as it was, but it’s still there.
We know there are “X” number of casino hotel rooms to be completed. I don’t know if 2011 is the date. It could be 2015, or 2018. It depends on the financial markets.
again, there’s not a lot that can be done. Aguero: I think the biggest issue for Southern Nevada is making sure not to turn our community into a cash cow. It’s as though we think that we no longer have any responsibility to invest in our long-term health as a community. If we can’t learn to invest in things like transportation or public education, I think we’ll have real problems.
When money starts to flow again, when that situation starts to improve, we’ll have a clearer picture of how long it’s going to take. I think we need to realize in Las Vegas that we have a limited supply of land. So as long as you have finite resources, is it safe to say that sometime in the future there will be a run-up in prices again? Yeah, sure it can happen again, assuming those dynamics of limited supply are still there. I think it’s unrealistic not to be somewhat bullish on the long-term growth of Las Vegas. Now, short term, sure there are going to be some spots in the road. But we’ll get through this. Hardcastle: I’m not saying that I’m not bullish. But look out beyond the Las Vegas Valley. Look nationally. Because the question is: Is the hotel-casino business structure sound? Regarding the airlines, the industry has been underpricing tickets for some time and that has finally been catching up with them. Thirty percent of our visitor volume on a good day comes from California. And some of that comes from flying, not just driving. But the other 60 or 70 percent are from Colorado, Utah or Arizona -and a large chunk of those people are flying in. And there are other challenges. More people went to gamble in Macau for the New Year than Las Vegas. That’s the first time that ever happened. We’re now having to compete harder for international tourists. Aguero: That’s not new. Macau is certainly a new and different location. But we were warned in the early 1970s that all the high rollers would go to Atlantic City. We heard in the mid-90s that gross casino revenue from California tribal gaming had exceeded that of Las Vegas.
SPECIALREPORT But the reality of it is, in regard to tourism, it seems to me that it is always a growing pie. We may be getting a slightly smaller piece, but we’re getting a piece of a slightly larger pie. In regard to Macau, the vast majority of people traveling there never had the opportunity to come to Las Vegas. Having brands like Wynn and MGM throughout the United States will make those brands stronger. One question we have to ask as these markets develop is, should these companies, with gas prices being what they are, invest more in various satellite facilities rather than strictly in Las Vegas? I think that’s a fair question. The Sun: In investment terms, is Las Vegas a safe investment, a somewhat risky one, or is Las Vegas volatile? Smith: I think if you’re going to invest long term, Las Vegas is a pretty safe bet. I think the volatility is always going to be there, but I think it will be lessened because of the growth of the area. Aguero: I agree that gaming stocks are undervalued. I believe that investment is the right one. Smith: To me, the number one issue is the lack of financing that is curtailing construction. Gibbons: I’d call it economic malaise. Gaming revenues are down 16 percent, McCarran is down 5 percent. At the end of the day, it comes back to the notion that we are in a slump. And I think we’re going to get out of it, but
The reality is that we’ve created an economy that basically relies on two industries, construction and tourism. Diversification is necessary. Tourism will always be part of our future, but it can’t be the only part. Sun reporter Mary Manning transcribed this conversation.
Las Vegas Drops To 16th In National Apartment Index San Francisco Retains The Top Position Source: MHN Online, By Anuradha Kher
Las Vegas moves down two places this year to No. 16. San Francisco retained the top position in this year’s National Apartment Index, supported by the strongest effective rent growth in the ranking. San Diego climbed six places to No. 2, due to the lowest vacancy rate of the markets covered. Washington D.C. moved up six places to No. 3. Los Angeles checked in at No. 4, and Seattle moved up three places to claim No. 5. Two Midwestern markets, Minneapolis-St. Paul and Milwaukee, posted the most significant upward moves in the index. The Las Vegas apartment market will stay in flux during 2009 due to lingering economic stresses, but signs of a recovery are starting to appear, according to a 2009 National Apartment Report by Marcus & Millichap. "We are seeing some of the fundamentals that lead us to believe that there will rent increases in 2010," Michael Shaffner, associate vice president of investment at Marcus & Millichap, tells MHN. Even with rent increases predicted for 2010, new construction is at standstill.
ACCESSLASVEGAS February 2009 | March 2009
Las Vegas Metro Occupancy Trends January 2008 through December 2008 93% 92% 92.02%
ov em N
t Se pt e
us Au g
e Ju n
il Ap r
ar ch M
ry ua Fe br
Ja nu a
Source: CB Richard Ellis (100,770 Apartment Units Surveyed in December 2008)
Las Vegas Snap Shot KEY INDICATORS
Source: Red Capital Group
3Q 2008 RESULTS
CHANGE OVER LAST YEAR
EXPECTED TO RISE
STEADY TO FALLING
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ACCESSLASVEGAS February 2009 | March 2009
Best Multi-Family Bets for 2009 and Beyond Global recession, tight credit, nationwide layoffs and volatile gas prices have cast a harsh light on America's multi-family markets
modest drop in occupancy for 2009 will be countered by still slightly positive rent change, leaving overall revenues essentially flat. Pittsburgh, Pennsylvania Current Performance: Occupancy of 97.5%, Annual Rent Growth of 3.6%
Source: MHN Online by Teresa O'Dea Hein, Managing Editor
INVESTORUPDATE "Flat is pretty darn good this year -- that can put a metro area in the top tier of all U.S. markets," predicts Greg Willett, vice president for research and analysis at M/PF YieldStar Inc., based in Carrollton, Texas. "Bullish is a relative term for 2009," Willett says. Job losses and competition from shadow inventory will pose significant challenges, industry observers warn. Potential Bright Spots for 2009 While the Las Vegas market continues in flux, these markets may be more viable options to invest in for 2009 and beyond: Washington, D.C. Current Performance: Occupancy of 94.9%, Annual Rent Growth of 2.8% A change in administration tends to be good for the D.C. markets, Willett says. Already, Washington, D.C. is the healthiest of the nation's very active apartment construction centers, adds Willett, "and it looks likely to remain that way." Ongoing development at the start of 2008's fourth quarter was about 10,400 units, with a sizable block of that comprised of properties that began construction as condos but now will complete as apartments. With that much product on the way and employment growth expected to cool to just a handful of positions, occupancy seems apt to drop slightly during 2009. But rent change should remain positive, translating to mild revenue increases. The District itself looks vulnerable to pockets of softness, Willett warns, partly because there's quite a bit of shadow market stock available in the form of individually owned condos offered for rent. However, the metro's suburban neighborhoods in Maryland and northern Virginia appear in solid shape, with substantial rent growth. Denver, Colorado Current Performance: Occupancy of 94.7%, Annual Rent Growth of 2.8% Denver results are helped by its revived downtown and a diversifying business environment that includes energy, aerospace and tech. After Denver experienced an extended period of minimal deliveries, construction activity has increased somewhat. There were about 5,900 units under construction going into 2008's fourth quarter. Willett points out that the good news is that a big block of that new supply will finish during early 2009, so that gives the metro most of the year to regain some momentum after taking an early hit in its performance. M/PF YieldStar anticipates that the metro's 8
Pittsburgh has quietly become one of the healthiest apartment markets across the country over the past couple of years. While employment additions have been limited, growth has been just enough to gradually push up occupancy in an area that has received virtually no new supply. The metro broke into the ranks of the nation's top occupancy performers in the middle of 2007 and has stayed there ever since. And in turn, the pace of annual rent growth has accelerated. With only 400 multifamily units approved for construction during the past year, deliveries again will barely register during 2009, so momentum should be maintained as long as job loss is contained to the handful of positions expected by leading economists. Raleigh, North Carolina Current Performance: Occupancy of 92.7%, Annual Rent Growth of 1.3% YieldStar now likes the Raleigh multifamily market more than Charlotte's, what with the latter city's reliance on the now-challenged banking sector. At the same time as job cuts are coming, Charlotte's multifamily inventory is growing by one-third in the next 18 months. Raleigh has experienced a recent building boom that has weakened both occupancy and rent growth. However, that burst of building activity now is winding down, with construction going into 2008's fourth quarter at 3,300 units, many of them finishing right at the end of 2008 or in early 2009. Leading economists remain optimistic that Raleigh will manage to produce a reasonably healthy block of additional jobs in 2009, providing some underlying support for housing demand. In the worst case, then, this market's performance seems apt to hold essentially stable during the coming year. San Diego, California Current Performance: Occupancy of 96.3%, Annual Rent Growth of 3.5% San Diego's apartment market is in surprisingly good shape for a metro where job loss is occurring and where a very high foreclosure rate is boosting the selection of shadow market rental alternatives. Unlike in most other areas, the presence of inflated numbers of for-lease single-family homes doesn't seem to be having too much negative impact on the apartment sector, likely because these shadow market options tend to be too expensive for the typical apartment renter. With 3,100 apartments under construction at the beginning of 2008's fourth quarter, near-term deliveries seem likely to outpace apartment demand, resulting in a minor dip in occupancy. But rent growth should be sustainable at levels strong enough to yield at least a little revenue increase during 2009.
San Francisco, California Current Performance: Occupancy of 96.4%, Annual Rent Growth of 3.2% While San Francisco's annual rent growth rate has cooled off from the previous double-digit pace, increases remain well above the national norm. And occupancy is holding strong. Ongoing building at the start of fourth quarter 2008 was roughly 2,500 units, not an over-the-top figure but more than is typical in this high barrier to entry market, explains Willett. This metro actually has trouble accommodating more than minimal volumes of new supply, since new product is so expensive and targets such a shallow pool of renter prospects. As a result, YieldStar predicts that occupancy may backtrack slightly during 2009, but revenue change should remain in positive territory, with rent increases registering stronger than the occupancy loss. Fort Worth, Texas Current Performance: Occupancy of 92.3%, Annual Rent Growth of 2.8% While YieldStar admits that Fort Worth starts from a weaker position than most of its top picks, it has some good things going for it. Like the other metros in Texas, Fort Worth is expected to register fairly healthy employment growth that will support housing demand in 2009. And unlike other Texas markets, the metro isn't experiencing significant overbuilding. Ongoing construction going into 2008's fourth quarter was at roughly 4,100 units, nearly all of it very close to finishing, so it has most of 2009 to try to gain traction. Willett predicts, "Fort Worth actually might end up as the only metro across the country where occupancy rises during 2009, and in turn rent growth should be sustained as well." Seattle, Washington Annual rent growth in Seattle had been about 7 percent in the last two to three years, but Parsons from Opus West expects that to slow down to 2-3 percent in 2009. "I see rents flattening out, pausing and then picking up again,"
Parsons predicts. The difficult mortgage market will keep renters in apartments that rent for $2,000-$2,500 per month, he believes. And with about 36 percent of Seattle's population under the age of 40, Parsons believes that a number of them are renters-by-choice who want to stay in the downtown market. New York, New York New York's fiscal woes are deepening as more Wall Street institutions make headlines, for the wrong reasons. Yet, in Manhattan, the average price per square foot of all new development was $1,320 in the third quarter of 2008, down 1.5 percent from the prior year quarter, according to the most recent Miller Samuel market report. However, the average price per square foot of a re-sale apartment was up 4.3 percent to $1,142 per square foot. A Brown Harris Stevens brokerage report noted that the average Manhattan apartment price fell from the second quarter of 2008, but was up 12 percent over the past year to $1,473,351. Boston, Massachusetts Marcus & Millichap's third-quarter Boston Apartment Research Report says that about 2,900 units are expected to come online in Boston this year, compared with 4,300 units in 2007. The forecasted vacancy of 6.5 percent at
Apartment Owners Suffer, Renters Catch A Break Source: MarketWatch
If fewer people are buying homes, you'd think that rental properties would be in high demand. But job losses and a sour economy have also eroded demand for apartments, according to the latest data from the National Multi Housing Council. "Once again, apartment firms are facing tough market conditions not of their making," said Mark Obrinsky, NMHC's chief economist, in a news release. "Earlier in the decade the bubbleinduced rise in homeownership eroded apartment demand; now the economic and financial collapse caused by the bursting of that bubble is taking a toll." Prospects for the apartment industry are strong in the long term, with the number of people between 20-34 years of age -those most likely to rent -- rising rapidly.
year-end 2008 will be 80 basis points more than the rate one year earlier, due primarily to competition between shadow rentals and Class A stock. Asking rents are expected to rise 3.1 percent this year at $1,730 per month, according to Marcus & Millichap, while effective rents will increase 3 percent to $1,649 per month. Despite a modest rise in vacancy this year, healthy occupancy within the Boston apartment market will provide above-average rent gains, especially for lower-tier assets, as more individuals seek affordable housing options, according to Marcus & Millichap. Class A properties continue to compete with shadow stock as a result of robust condominium completions during the past few years.
"For now, though, that demographic advantage is being trumped by the worsening job market, which is leading more people to move back in with family or take on roommates to save on housing costs," Obrinsky said. Consider NMHC's "Market Tightness Index," a measure of changes in occupancy rates and /or rents. The index declined to 11 in January from 24 three months ago. A reading above 50 indicates that apartment-firm executives believe market conditions are improving; below 50 means they're worsening. Those in the market for an apartment right now will see the silver lining in the struggles of local apartment markets: For those people, less competition for quality rentals could mean getting a better apartment for their money. 9
ACCESSLASVEGAS February 2009 | March 2009
Apartment Rental, Occupancy Rates Fall With Vegas Home Prices Source: Las Vegas Sun
Apartment rental rates are declining along with home prices in much of Southern Nevada, reports issued in recent days show. RealFacts Inc., a data analysis company based in Novato, Calif., today issued reports showing apartment rental rates and occupancy rates declined in the fourth quarter both nationwide and in the Henderson and Las Vegas markets. This is good news for renters, but overall is a negative sign for the economy by reflecting job losses and corporate cutbacks that have left fewer people looking to rent apartments. The numbers also indicate investors may be less likely to build or buy multifamily residential projects until the economy turns around. "This data for 2008 indicates that the year’s widespread economic problems have finally affected the rental market by the end of the year," RealFacts said. "The choice to invest in income property for the last several decades has been based on the assumption that rents would continue to grow. In 2009, investors are likely to evaluate rental properties based on current income alone." RealFacts said rents declined in nearly every metropolitan area in the country between September and December. Nationally, the average rent for an apartment dropped below $1,000, declining from $1,002 in September to $993 in December. The decline in rents was matched by a nationwide decline in occupancy from 92.9 percent in September to 92.2 percent in December -- leaving 10,000 apartment units vacant nationwide at the end of the year. RealFacts said that in the Las Vegas area, average rents in the quarter were $996 in Henderson, down 0.6 percent from a year earlier; $967 in North Las Vegas, up 2.4 percent; and $860 in Las Vegas, down 0.9 percent. 10
LOCALNEWS The occupancy rate in Henderson was 92.2 percent, down 1.1 percent; 92.1 percent in Las Vegas, down 0.3 percent and 89 percent in North Las Vegas, up 2.5 percent. About the only good news seen in recent real estate reports was that home sales in the Las Vegas area rose as lower prices attracted buyers. The Greater Las Vegas Association of Realtors said 2,498 homes were sold locally last month, up 14.4 percent from November as the median price fell from $186,000 in November to $175,000 in December. Local home prices are down nearly 33 percent from December 2007, the association said.
The lowest price is $1,600 a month for a one-year lease on a studio. One bedrooms are as low as $2,600 and a three-bedroom penthouse is $6,500 for a one-year lease. Those same units are $7,500 a month for those who only want it for three months and $7,200 a month for a six-month lease. High-rise Realtor Bruce Hiatt says it’s a brilliant strategy for Trump to generate more operating revenue and help establish the hotel. With the troubled economy, competition has been tight and Trump was competing with Steve Wynn’s Encore. Some staff members were let go and that reduced services, Realtors say. By bringing in more people as tenants, that will enhance services and increase jobs, they say. “I think it is going to be the trend for the next couple of years” Hiatt says. Hiatt also states he wouldn’t be surprised if CityCenter does the same thing at Vdara and other condo-hotel complexes follow suit. The units could ultimately be sold when the economy improves.
“We’re encouraged to see home sales here in Southern Nevada increasing at such a dramatic rate as we work through a challenging time in the local and national economy and in our housing market. Traditionally, December is a slow time of year in real estate because of the The hotel units will be attractive to holidays and colder weather. companies that bring in accountants and others to do temporary work and need a place for three months or longer. They get the services of a high-end hotel with a spa and restaurants, maid service and a health club. That is a lot of luxury to get for the prices Trump is charging, Is this the condo-hotel’s Realtors say.
Trump Towers Shift To Apartments newest trend?
Source: Las Vegas Sun
With the condo-hotel market hard hit and many prospective owners unable to close on their units, Donald Trump has an innovative solution. The real estate developer has decided to lease units at the Trump Tower up to one year as upscale furnished apartments. Realtors are hailing it as a trendsetter that may catch on with other developers such as MGM Mirage with its condo-hotel Vdara, whose sales are stagnant. “It is a very smart move, and it is not an unexpected move,” says Steve Bottfeld, executive vice president of Marketing Solutions. Trump is listing all of his units for lease, including studios, one / two bedrooms and penthouses.
Realtor Aaron Auxier calls it a smart move given the amenities that a hotel offers to residential living. A condo-hotel could become the new residential, he adds. “People are showing interest because of the amenities,” Auxier says. “It adds to the competition and puts the heat on other properties. Their prices are so affordable. This is a bargain. It is fully furnished and ready to go. All you need to bring is your toothbrush.” The location is also prime being next to the Fashion Show mall and many casinos. “Everybody will be watching to see how successful Trump is, and what direction they may take with their projects,” Hiatt says. “The Trump name is so strongly branded. I think this is going to be successful.”
A Picture Is Worth A Thousand Words To Your Future Residents Source: Toni Blake, Southern Nevada Multi-Housing Association Facebook Group
How are you using digital photographs today with your marketing? Have you seen those new digital photo frames? Well, what if you personalized your presentation with digital photos of each customer at lease time and asked him or her to write a testimonial with reasons why they decided to rent. Instead of just photos - your frame would display a photo card with testimonial messages to the future residents! Create personalized follow-up by taking cute picture of your future resident during their tour. Ask them to tell you their five favorite things about the apartment and community and then take a picture for a custom follow-up. You can use an inexpensive digital camera, or cell phone camera, or purchase a quality low cost camera to create a virtual tour of your property. Take photos of the area entertainment, restaurants, movie
Top Ten Most Popular Apartment Search Websites in Fourth Quarter 2008
theaters, shopping and more! The staff could then create a custom email with the personalized tour photos as a part of their follow-up!!! Many of the e-card sites today allow you to upload a photograph giving you a chance to use a group photo of your team or even a picture of them at the property! “You look good here - go to www.myproperty.com and make this your home.” Digital photos can be sent to a future resident cell phone, posted my Facebook and tagged and attached to an email. If a customer is on the way to the property to visit, and speaking to you on their cell, you can email them a jpeg color map to your community to follow! When they
IT is 2009 -- what are you doing NEW and different!!!! Take advantage of the resources and tools you have right now and get creative!!!! How you are using digital pictures in your electronic marketing!!
on the number of times renters "check availability" online per property. When rental prospects check availability through VaultWare powered websites, they see current rental pricing and availability versus filling out an email form to request this information.
Source: Realty DataTrust
Checking availability is typically the first step in the rental process after viewing the property online.
Realty DataTrust, makers of VaultWare, the multi-family industry's leading online availability and reservation system, released the list of the ten most popular apartment search websites during the 4th quarter of 2008. The rankings are based
To help put these numbers into perspective, if a property had advertised on these top ten Internet Listing Services during the 4th quarter, 713 unique rental prospects would have viewed their apartment availability online. These top
leave – you can send them a photo of your entire team holding a sign that says, “Miss you already - turn around and come back NOW!” It would also include the URL with a 24/7 invitation to rent their apartment when they get home. We actually had a customer turn around and rent when they received this unique and confident photo! It’s time to use every tool, every technique to standout in the crowd of possibilities!
ten websites are part of the 160+ VaultWare powered websites with online leasing functionality in the United States. Rank 1 2 3 4 5 6 7 8 9 10
Website Availability Sessions Rent.com 200.9 4walls.net 165.6 ForRent.com 81.6 ApartmentGuide.com 77.8 Apartments.com 69.1 ApartmentShowcase.com 53.7 Apartmenthomeliving.com 26.4 Move.com 19.3 MyNewPlace.com 11.1 ApartmentSearch.com 7.8
What hands are your advertising dollars falling into online? Maybe it’s time to reevaluate your online marketing ... For more information, visit the VaultWare Online Marketing Index (www.vaultware.com/marketindex). The VaultWare Online Marketing Index enables multi-family professionals to benchmark their individual property or their portfolios’ online leasing results against industry averages. 11
ACCESSLASVEGAS February 2009 | March 2009
SNMA Swears In 2009 Board of Directors, Holmes Named President The Southern Nevada Multi-Housing Association (SNMA) welcomed its new Board of Directors on January 20, 2009 at their annual Installment Dinner. At the forefront of the dinner was Advanced Management Group’s President Bret Holmes. Holmes is the newly elected President of the SNMA and promises change to the association in 2009. “This is a year of change, not only in our great country but at the SNMA too”, Holmes said. Some of the changes Holmes touted are a complete overhaul of the current website, a new logo indicia and an appointment of a Executive Director. “These changes will help the SNMA be more recognizable, cutting edge and will facilitate long term growth by making things much easier for our members and potential members”. The SNMA is a non-profit corporation that provides education and legislation support on the city, county, state and national levels. SNMA also works very closely with the National Apartment Association (NAA), which is the industry’s largest voice on many of multi-family’s issues. “The relationship SNMA and NAA are building is monumental for the Las Vegas multi-family industry. It is truly a synergy we embrace,” Holmes added. For information, article consideration and featured columns ACCESSLASVEGAS can be contacted at 702.699.9261. The publisher of this newsletter is The Internal Press.
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