Updated November 27, 2023 - 7:06 pm
Apartment rental rates in Clark County dropped this year, but 2024 will likely be another story, according to data from the Nevada State Apartment Association.
Rent has dropped about 2 percent year over year, bucking the trend of the last few years, said Robin Lee, executive director of the Nevada State Apartment Association. The association gets its data from commercial real estate analytics company CoStar Group Inc.
The average rental price for a one-bedroom apartment in Clark County right now is $1,400 (a 1.6 percent drop from last year), with vacancy rates on the rise, Lee said. Average rent was at $1,450 last year.
Forecasts predict rents to slowly start rising sometime in 2024 but not in the first quarter, Lee said. But rents won’t rise even close to what the market saw in 2021 when inflation soared coming out of the pandemic.
“The prediction is that the increase will hit at or below 5 percent and stay flat through the next four or five years,” she said.
However, the future is most definitely uncertain, Lee said, given the current macroeconomic climate of high interest rates and construction costs largely stalling the pipeline for apartments, outside of luxury builds.
“A lot of the supply has already hit the market,” she said. “Some of it is still under construction and what we’re hearing through development channels is it is expected to slow. New projects aren’t anticipated to be coming on the market in the volume that they have in the last couple of years.”
Units under construction
The apartment association is tracking 8,000 multifamily units under construction in Clark County. Jeffrey Swinger, an executive vice president with Colliers International who focuses on the multifamily market, contends that 10,000 units currently are under construction.
Swinger said the brokerage pulls its data from various sources including Axiometrics, Yardi Matrix and Real Capital Analytics, plus their own independent research.
The apartment association and Colliers agree 4,000 apartment units will open this year, but Colliers projects 8,000 units to hit the market in 2024 and the apartment association projects 4,000 units will hit the market.
Lee said it’s not necessarily the case of one set of data being wrong, more so of how data is collected and who is counting what.
“There are just so many layers to multifamily,” she said. “None of us are giving out the wrong numbers, it’s just the sources can be so different it creates a discrepancy, such as not including projects that have been leased up to 80 percent, for example.”
Swinger said vacancy rates for multifamily units in the Las Vegas Valley, which they have at 7.1 percent, will also most likely get into double digits in 2024, and Lee said a “healthy” vacancy rate is somewhere around 6 percent.
One of the biggest trends hitting the rental market in Las Vegas, and across the United States, is the rise of rental concessions.
Data from the Nevada State Apartment Association shows that approximately 40 percent of apartment landlords are now offering some type of concession, be it extra perks or a free month’s rent, to lure renters during the rise in vacancy which came about from a pandemic construction boom within the multifamily market.
This lines up with Zillow data, as the online real estate brokerage also has valley rental concessions at 40 percent — nearly double the rate of last year.
Anushna Prakash, an economic research data scientist at Zillow, stated in a news release that 43 of the largest 50 metros in the country have seen a large rise in concessions from this time last year.
“The pandemic era’s increase in concessions was a direct response to decreased renter demand,” she stated. “Currently, we’re witnessing a different scenario where the demand for rental housing is high, but there’s been a notable rise in supply. To differentiate themselves from newer, potentially more amenity-rich apartment buildings, property managers are stepping up their game, offering more incentives to attract potential renters with a broader range of choices.”
At the same time, the multifamily construction boom appears to have peaked, according to a 2023 Multifamily Construction Report from Fannie Mae.
“The financing costs of new developments have increased substantially since interest rates began increasing in early 2022, another reason why we expect a slowdown in starts activity,” the report stated.
Las Vegas is already in the midst of an affordable housing shortage, and it may soon enter a squeeze when it comes to multifamily as well if new product stalls due to financing and construction issues. This has led many community leaders and politicians to work toward freeing up land locally for new development, with a focus on “workforce” housing.
Lee said clearing bureaucratic red tape is one issue that needs to be combated at all levels — federally, statewide and locally — and Las Vegans, like residents all over the country, should not push back against new projects in their neighborhoods.
“I don’t feel like the municipalities are necessarily trying to restrict the development of affordable housing,” she said. “They just need the ability to open things up, and a lot of it is our neighbors. Our neighbors need to be open to the idea of building affordable housing in their area. The only thing really out there right now for developers to build are those luxury units, which is the only thing that pencils in for them these days.”
Contact Patrick Blennerhassett at firstname.lastname@example.org.