Economic Growth, Affordability Drive Las Vegas Multifamily Market

Las Vegas has landed at the top of the list for multifamily investment. The city has both economic growth and diversity as well as a significant affordability advantage compared to other Western US markets. Along with Phoenix, Las Vegas has rapidly become a hotspot for multifamily investment. Chicago-based Oak Residential Partners has recently purchased Madison at Black Mountain Apartments in the Las Vegas suburb of Henderson, siting the local economy and affordability as the top reasons why they are attracted to the market. This year, it is looking to expand its exposure to the market.

“Oak has a national and proprietary research model used to forecast rental growth and multifamily demand by utilizing dozens of different metrics and key economic data. Las Vegas was repeatedly highlighted as an investment target over the past several years,” Eytan Peer, president of acquisitions at Oak Residential Partners, tells GlobeSt.com. The most significant fundamentals were a rapidly growing economy and a more diversified economy. Nevada continues to perform as one of the fastest-growing job markets in the nation. Projected job growth for 2019 is 3%, creating a rental housing demand for 6,000 units, but less than 3,000 will be delivered this year. Hospitality and construction still represent a large part of the employment sector, but we’ve seen significant expansion in both industrial and healthcare. That’s the primary difference from Las Vegas’s economy a decade ago, to the present.”

In addition to the economic growth in the market, it is also more affordable to its Western US neighbors, resulting in population growth and inward migration. “Las Vegas has become a western alternative for both retirees who can’t, or don’t want to afford the living expenses in California, and for millennials who are attracted to the overall lower cost of living,” adds Peer. “We’ve concluded that there simply isn’t enough available housing to maintain pace with demand.”

Oak Residential targets mid-1980s to mid-2000s multifamily product and conducts a value-add strategy, modernizing both the interior and exterior of the property. For Madison at Black Mountain Apartments, the investor plans to focus on interior units, installing new faux-wood flooring, stainless steel appliances, resurfaced counters, window and lighting fixtures and a backsplash. In future acquisitions, it will execute the same strategy. “We also take a nearly forensic approach to optimizing the income/expense opportunities that we may discover at a given asset,” says Peer. “Overall our goal and intention is to improve the overall quality of life for our tenants, while generating above average returns for our investors.”

While there are opportunities in Las Vegas as well as a strong economic climate, Oak Residential is still proceeding with caution. “In general, we typically establish a 6-month review period upon entering a new market, in order to determine the success of our initial assumptions,” says Peer. “Once confirmed, we became more active in the latter half of 2018 and hope to grow the portfolio there further in 2019.”

Still, Peer expects more acquisitions in the market this year, saying, “We’re seeking to add several high quality and well-located value-add deals in Las Vegas to our portfolio in 2019.”