Pent-up demand creates wave of luxury apartment development in Las Vegas Valley

The first luxury apartments constructed in Summerlin in nearly a decade are slated to open in April — part of the ongoing wave of higher-end units under development and consideration in the Las Vegas Valley.

The highest profile project is Constellation, a 124-unit gated rental luxury development in Downtown Summerlin, the 1.6 million-square-foot retail, dining, office and entertainment complex that opened in October 2014 near Red Rock Resort. A two-month delay in construction pushed back the opening and pre-leasing of the units, which is set to launch in mid-February.

The Downtown Summerlin project is among more than 6,000 apartments in the valley set to come online by the end of 2016 and early 2017, said Spenser Ballif, a senior vice president at CBRE, a commercial real estate brokerage. The majority of units are considered the higher-end Class A units whose vacancy rate is about 5 percent. Apartment construction was nonexistent following the Great Recession until units finally started opening in 2014.

"There's pent-up demand from people that view home ownership a little differently," Ballif said. "A lot of people lost their homes in foreclosure, and their parents lost their homes in the last go-around. I think the credit of people is not quite what it once was so it's much more difficult to buy a home than it was in the past."

That's in part what developers of Constellation, a joint venture of The Calida Group and The Howard Hughes Corp., the developer of Summerlin, are counting on in part for Downtown Summerlin. Howard Hughes plans to develop other high-end rental units in the next two years and eventually envisions more than 4,000 apartments, lofts, condos, town houses, and brownstones for rent and purchase in Downtown Summerlin.

"We're excited about it because it's the beginning of a new type of development here in Summerlin," said Kevin Orrock, Summerlin president for The Howard Hughes Corp. "There's not an apartment product that's a situated in an environment like this is going to be. You have a three-to-five-minute walk to Red Rock Resort and our retail dining and entertainment experience on the downtown property. There's a gym right down the street. This a strategic location for the market that wants to be able to walk."

Echoing what developers said a decade ago about midrise condo development throughout the valley, Eric Cohen, managing director of The Calida Group, said many people still want that lock-and-leave lifestyle rather than deal with a pool or landscaping that goes with a home. One reason why the midrise condo concept hasn't worked so far is that people didn't want to pay the HOA fees that come with purchasing, but they still want to live in boutique-like hotel setting with concierge, massage, spa, resort pool and other amenities in a great location with easy freeway access, Cohen said.

Rents haven't been set for Constellation, but Cohen said the average may be about $1.85 per square foot, which would be higher than the $1.78 at its property at The District. That means many would pay in the upper $1,000s a month and some surpass $3,000 a month.

"We created a lifestyle you don't get on the single-family side," Cohen said. "Our demographic is a renter by choice and not because you have to rent. You would go to a different property other than ours if you have to rent and you're price-point sensitive. There are people willing to pay more and higher rents for units with nicer finishes and better services and amenities in the right location."

Located at the northeast corner of Downtown Summerlin at the intersection of Town Center and Griffith Peak drives, the three-story, 170,000-square-foot multifamily development includes one-story and two-story units ranging from 940 to 1,900 square feet. There are one- and two-bedroom apartments in the 16 buildings.

More than 500 people are on a list showing interest in renting at Constellation, Cohen said, adding he expects a range from millennials to baby boomers to become tenants.

"It's new people coming to town," Cohen said of prospective renters. "It's young professionals. It's people who want to downsize from their homes. It's empty nesters. It's people who have an office here but live in California."

The Calida Group is the developer of the Elysian at The District, 360 units near the Green Valley Ranch Resort in Henderson. The complex, which opened in March, is already 75 percent leased and is expected to reach 95 percent occupancy in three months. Apartments there rent for $1,300 to $3,000 a month.

Many projects are in the works along the 215 Beltway that target higher-end users and tend to offer more amenities for those seeking that lifestyle, said Brian Gordon, a principal with the consulting firm Applied Analysis.

That's no surprise, Gordon said. "The cost of land has forced many developers to focus on the higher segment of the market, which allows them to make many of those projects pencil as they have sufficient demand to fill those units," he said.

Gordon is bullish on the latest project. "Summerlin is the premier area in the Las Vegas valley and has a substantial amenity with Downtown Summerlin, a stone's throw away from Constellation," he said.

The Calida Group, which has 255 townhomes at Elysian at Southern Highlands, announced that Elysian West, 466 units at Tropicana Avenue and the 215 Beltway will open this spring and rent for $1,100 to $1,800 a month.

Construction is slated to start this week at Elysian at Stone Lake, 360 units at Stephanie Street and Wigwam Parkway, and construction will start this summer on Elysian at Flamingo, 360 units at Flamingo Road and Hualapai Way. In 2016, The Calida Group will have new projects leasing a total of 1,160 units. In 2017, it will add 841 units in three projects, and it will add 1,000 units in 2018.

"We're super optimistic on the Las Vegas market, but we're focused on being in the best locations where people want to live and be," said Cohen, whose company launched in August 2007 before the real estate market collapse. The company recently purchased a 146-unit apartment complex in San Francisco and is eyeing projects in Salt Lake City.

Some question what the future holds for the high-end luxury apartment market, Ballif said.

The projects at the District and Summerlin are the right locales for building ultra-high-end, he said. The answer is coming for projects under construction or planned, he said.

"How many can you build? I don't know (if) anyone has the answer to that," Ballif said. "We don't know, but there was very little delivered in that space from 2009 to 2014."