In the period between September 2018 and September 2019, the national average for effective rent growth among conventional properties with at least 50 units was 4.1%. That is certainly down from the highs of a few years ago, but nevertheless is a healthy number this late in the cycle. There are some markets that are bucking the trend of flattening rent growth, and Las Vegas is one such example. Over the last 12 months, average effective rent per unit has increased by just under 9%.
This growth, more than double the national average, brought the average unit to about $1,115 per month to end September. Far from being a one-off outlier result, this gain is in-line with recent history for the Las Vegas market. In fact, looking at the last five year-over-year periods, rent growth has been between 6.5% and 9% for each annual period. Also, even when considering rent growth among only stabilized properties, the market has seen an 8% gain in the last 12 months.
Las Vegas: Market Notes
The relationship between delivered new units and net absorption1 is one factor that is likely at play here. In the last 60 months, 14,000 units have been absorbed while only about 12,000 new units have ben introduced. The result has been an average occupancy hovering around 93% consistently since September of 2014. Since that time, the percentage of properties offering a lease concession has gone from 52% to 16%.
Another factor is that Las Vegas came out of the previous recession quite a bit later than most markets and is therefore still enjoying the gains experienced in other markets a few years ago. Lastly, because the Las Vegas area had a conventional capacity of about 151,000 units in September of 2014, the little more than 12,000 new units brought online since represent an 8% expansion in market capacity. These new, more expensive units making up such a share of the total market result in substantial average rent increases overall.
1Net absorption refers to the net change in rented units