Las Vegas’ multifamily sector is expected to experience growth in average rents and occupancy rates through the end 2016 due to growing employment numbers and an increasing population in the valley pushing demand higher, according to a third-quarter report from Marcus &Millichap, a commercial real estate investment services firm.
Las Vegas’ average effective rents are expected to reach $890 for multifamily product by the end of 2016, an increase of 7.5 percent for the year over 2015, the report states. As of midyear, average effective rents reached $865, just over a 2.75 percent climb from 2015’s $823.25.
Employment levels also will be on the rise in 2016, according to the report. The local workforce is expected to go up by 3.1 percent by the end of the year, creating 28,500 new jobs. In 2015, the local region increased in the number of jobs by 2.4 percent, mostly in the education and health services sector.
The valley’s creation of new jobs and low cost of living also has resulted in a positive gain in population for the local region, the report stated. According to the latest research from the Las Vegas Convention and Visitors Authority, Clark County’s population jumped 2.2 percent in 2015 over 2014, equating to just over 2.1 million residents.
“The rates of household formation and population growth, particularly for 20- to 34-year-olds, have subsequently accelerated with Las Vegas far outpacing the national average,” according to the report. “The expanding population base of young, highly employed residents will provide apartment operators with a deep pool of potential tenants.”
Vacancy rates are expected to be driven down. By the end of the year, the valley’s overall vacancy rates are expected to fall 60 base points — equating to 4.6 percent total vacancy. In mid-2016, vacancy sat at 4.9 percent.
New construction in the past couple years has yet to affect vacancy rates, according to the report.
In 2015, the valley saw the highest levels new product coming online since 2010, with 2,600 units being constructed. This year’s deliveries are expected to be slightly lower at 2,355 new units being built out by the end of 2016, according to the report.
Nonresidential, overall construction costs increase
Nonresidential and overall construction input prices were on the rise in September, according to an analysis of the U.S. Bureau of Labor Statistics Producer Price Index by the Associated Builders and Contractors.
According to the analysis, nonresidential input prices increase by 0.3 percent to an index of 105.4 in September on a monthly basis, while it fell 0.2 percent in August on a monthly basis to an index of 105.3. September was also the first month since November 2014 to have a year-over-year increase in the nonresidential sector.
“The rise in material prices both on a monthly and year-over-year basis is not good news for U.S. nonresidential construction firms,” said ABC Chief Economist Anirban Basu. “For roughly two years, declining energy prices had wrung much of the inflation out of the economy, allowing interest rates to remain low and the Federal Reserve to remain fixated on guiding the nation toward full employment. Energy prices are no longer falling. Moreover, wage and health care inflation are building, which could drive interest rates higher next year. That scenario is not good for real estate valuations and nonresidential construction.”
The index began at 100 in December 1986 and was designed to track the average changes in prices for material and supply inputs to construction industries.
There are 11 material and supplies covered under the index: unprocessed energy material. Individually, four of the categories fell in average costs for the nonresidential sector on a monthly basis in September: prepared asphalt and tar roofing and siding products, which was down 2.3 percent; steel mill products dropped 0.5 percent; iron and steel fell 1.2 percent; and softwood lumber dropped 1.4 percent.
The remaining seven increased: natural gas; crude petroleum; concrete products; nonferrous wire and cable; fabricated structural metal products; and plumbing fixtures and fittings.
Commercial Alliance Las Vegas elects 2017 officers
The Commercial Alliance Las Vegas, the commercial real estate division of the Greater Las Vegas Association of Realtors, announced its new officers and directors for 2017 in mid-October.
Jennifer Ott, an executive vice president for retail sales and leasing at ROI Commercial Real Estate, was elected to president. Ott will begin her term on Jan. 1.
Ott is a graduate of the University of Nevada Las Vegas and previously served as president-elect and as a director of CALV.
The president-elect for CALV’s 2017 lineup is Chris McGarey of Berkshire Hathaway Home Services, Nevada Properties. And Paul Bell, also of Berkshire Hathaway, was elected the 2017 treasurer of CALV.
Four director positions at CALV were also announced for 2017: Melissa Campanella of Logic Commercial Real Estate; Robin Civish of ROI Commercial Real Estate; Cathy Jones of Sun Commercial Real Estate; and Tom Lisiewski, of Your Real Estate Company.