(Read more on the multifamily market.)
LAS VEGAS-The demand for luxury condominium product here is not at its peak levels of two years ago but still quite active, according to a new mid-year report from Applied Analysis, a locally based business research and advisory firm. That activity includes lots of new construction balanced by a greater number of cancellations.
The company's research found 5,800 units completed and an additional 14,100 units under construction. The research also found 15,253 units that have been cancelled and an additional 3,877 units that have been at least temporarily suspended, and that relatively few active projects are writing hard contracts for the time being.
"Current market conditions, a lack of newly announced projects and the cancellation of those proposals with unrealistic development plans will ultimately help the luxury condominium market in the long-run," says Applied Analysis principal Brian Gordon. "The market remains in the midst of a re-balancing from an overheated demand profile to a skeptical consumer perception. We believe end-users will ultimately dictate demand within the luxury condo sector and normalized conditions will prevail over the next several years."
Gordon's partner Jeremy Aguero adds that uncertainty in the financial markets and the performance of resale activity has heightened his near-term concern for the viability of selected projects, though he didn't name names. "Developments that have the ability to position themselves as differentiators through branding, location, lifestyle and amenity offerings will rise to the top," he concludes.
In addition to the units under construction, most of which have been pre-sold, there were an additional 6,100 units being actively marketed for pre-sale that have yet to commence construction. Behind that, plans have been announced for another 58,500 units.
Of the 14,100 units under construction, 6,900 units are potentially "condotel" units, which means they may be put back into a rental program. Of the 6,100 units being actively marketed for sale, 2,400 units may end up in a formal rental program.
At mid-year, 718 luxury condo units were on the resale market, which is down slightly from the end of March. Approximately 37% of those units were high-rise units, while 20% were in mid-rise developments. Approximately 42% were condotel units. The average asking price for the resale units was $830,400, or $624 per sf. The average per sf sale price at which units sold for during the quarter was at $507 per sf, nearly 19% lower than the average ask.
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