Magazine article Journal of Property Management

Wild, Wild West

Magazine article Journal of Property Management

Wild, Wild West

Article excerpt

A continued Vegas boon highlights the Western real estate markets; Utah and California keep pace

Nevada: Roll the Dice

It's a safe bet to assume gangster Bugsy Siegel would be very pleased if he saw the current growth on the stretch of desert he settled more than 50 years ago, otherwise known as Las Vegas. Any casual visitor to Sin City will notice the construction cranes and scaffolds are more common than bachelor parties on the Strip.

CB Richard Ellis's Market Watch 2004-Las Vegas predicted all sectors of the city's market to be strong performers through 2005. Booming submarkets exist in the southwest, northwest and southeast areas.

According to the report, the city is experiencing healthy office market growth from businesses expanding and/or relocating throughout the valley, not to mention booming land prices and increased construction costs driving rental rates in new buildings northward. Marcus & Millichap's Office Research Report said office-using employment in Las Vegas was on track to rise by 4.7 percent in 2004, up from a growth rate of 4.2 percent in 2003.

Kenneth Fong, CPM, 2004 president of Las Vegas Chapter No. 99, said tourism is a major driving force in all markets in the city and pointed out that job creation has averaged 5.5 percent since 1999. With a population that now tops 1.6 million experiencing a growth rate of about 4.6 percent, the city expects to see more than two million inhabitants within five years.

Fong also cited the five-year-old Las Vegas trend of high-rise condominium developments, which are booming. The CB Richard Ellis report predicted about 5,000 new multiramily units to come online by the end of 2004, bringing the overall market vacancy to approximately 6.5 percent, a significant drop from 2003.

According to Marcus & Millichap, while most of the city's new construction is occurring along the Interstate 215 beltway, city officials are eager to spark interest in downtown development, stressing the usual obstacles such as parking, height and bulk are all negotiable. Additionally, as the costs of living and doing business in Southern California continue to rise, more businesses and residents are looking to move to Las Vegas, lured by a strong economy, favorable tax structure and good employment opportunities; of the approximately 5,000 new residents to the region each month, 60 percent are from California.

Las Vegass northern counterpart, Reno, is experiencing similar growth patterns, though not to such an extreme. Debbie Smith, CPM, vice president, multifamily, at Gaston & Wilkerson, AMO, and 2004 president of the Northern Nevada/Lake Tahoe Chapter No. 89 said the Reno-Sparks-Carson City-Lake Tahoe region has witnessed four-percent job growth during the last year and as recently as July saw unemployment rates dip as low as 3.8 percent.

"Portfolio-wide our multifamily occupancy levels remain around 96-97 percent," Smith said. "We had about 3,000 multifamily units come online this year. While we haven't seen much new construction in multifamily, condo conversions are just catching on and I think they'll be very successful."

Smith also said she's seen a significant reduction in cap rates because of exchange money coming from California. "More and more Bay Area companies are coming to the region because of the favorable tax climate. I think we'll continue to see strong occupancy and increases in market rates."

Utah: On Top of the Mountain? Getting There.

Without the migration bonanza of Las Vegas to rely upon, Nevada's neighbor to the east, Utah, is not seeing quite the same success, but the office sector is improving. …

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