Las Vegas Apartment Market Faces Downward Trend in Rent for Two Consecutive Years
Double-Digit Vacancy Rates Recorded for the First Time in Over a Decade
For the second year in a row, apartment rents in Las Vegas have declined, diverging sharply from the impressive 20% yearly increases seen in 2021.
Although the decreases have been slight, with a 0.6% drop in 2023 and a 0.7% fall in 2022, these figures fall significantly short of the average 5.9% growth over the past five years. The acquisition frenzy of apartment complexes in Las Vegas during 2021 and the initial months of 2022, with many investors banking on continued rent hikes, has not paid off as expected.
The downturn in rents has hit mid-tier, three-star properties the hardest, witnessing a 1.3% reduction last year. Consequently, regions with a dense presence of these properties, including the Las Vegas Strip and North Las Vegas, have experienced the most pronounced declines in rent, with the Strip seeing a 2.2% drop and North Las Vegas a 1.2% decrease.
The rental market has increasingly favored tenants over the past two years, with the vacancy rate soaring over 600 basis points to reach double digits for the first time since 2012. This shift has led to a stabilization of rent levels and a rise in leasing incentives. As 2024 begins, upwards of 40% of apartments in Las Vegas are offering concessions to attract new tenants.
Despite a significant influx of new apartment units, Las Vegas is gradually adjusting to the surplus. The slowdown in construction, spurred by rising interest rates and softening market conditions, is anticipated to alleviate some of the excess supply in the near future. Predictions for the market suggest a return to positive rent growth by the end of 2024, as vacancy rates start to level off.
Source: MMCG, Co Star