Multifamily Transaction Activity in Las Vegas Surges to Close the First Half

The Las Vegas multifamily market performed well during the second quarter with vacancy trending lower despite a continued period of elevated construction. Vacancy recorded its largest quarterly improvement since 2021 during the past three months, with the rate closing the first half at 6.3 percent. Since spiking in the opening quarter of 2023, vacancy has been mostly stable, even posting a slight decline in the most recent 12-month period. Improving vacancy conditions in the face of elevated supply growth are being fueled by continued renter demand and employment growth. Still, rents in the region have been mostly flat for the past 18 months after posting strong gains a few years ago.

Transaction volume picked up in the Las Vegas multifamily market in recent months following a slow start to the year. The investment market generated some momentum late in the quarter, with investors targeting large, performing Class B properties in the city’s suburban submarkets. Some Class C assets have also changed hands, but these assets have traded for prices between $105,000 per unit and $125,000 per unit. In prior years when rents were posting rapid gains, some of these older assets traded at prices closer to $150,000 per unit, or higher. The median price during the first half of 2024 was $172,500 per unit, down slightly from last year. Cap rates ranged between 5.25 percent and 6 percent during the last three months, closely tracking levels recorded in the previous quarter.

Looking ahead

Operating conditions in the Las Vegas multifamily market will likely close the year showing signs of stability. The cumulative impact of elevated construction is expected to result in a vacancy increase in the second half, although the rate is on pace to end 2024 similar to levels at the beginning of the year. The market is benefitting from a steady pace of renter demand growth, as the local economy continues to thrive even as the national economy cools. After posting strong gains in 2023, visitor volume to Las Vegas is ahead of last year’s pace, supporting strong gains in the city’s important leisure and hospitality sector. More growth is likely. During the second quarter, developer LVXP announced plans for a 2,500-room development on the Las Vegas Strip located across the street from the Fontainebleau. The project is expected to include retail, convention space, and a possible sports arena. Another significant project that will boost growth in the long term is the redevelopment of the former Mirage property into a new Hard Rock Hotel & Casino, which should be completed by early 2027.

A strong close to the second quarter signals a potential surge in investment activity for the second half of the year. Nearly all of the sales that closed in the second quarter occurred in the final few weeks of the quarter, as buyers and sellers are showing signs of having closed the expectations gap on pricing and cap rates. Preliminary indications show investment activity carried over to the third quarter, putting the market on track for total sales in 2024 to outpace levels recorded last year. The region’s continued economic growth—particularly in core industries—should spur additional investment. Middle-tier and lower-tier assets are expected to continue to account for most sales in Las Vegas, but there should be an eventual rebound in Class A transactions as properties lease-up successfully. Historically, Class A properties have accounted for about 15 percent of all transactions, but that total has retreated to about 10 percent since the second half of 2022.

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