Between 2019 and 2024, Las Vegas grew by 105,000 new residents, and Reno by 88,000. Mortgages hit their highest level since 2000 as interest rates soared. Single-family home sales dropped 13 percent in northern Nevada between 2023 and 2024, and single-family home prices jumped 19 percent in southern Nevada. Inventory of homes grew as prices rose, but so did the population—there were more choices, but a lot more people choosing.
Low inventory and high prices of single-family homes has already led to increased production of multifamily properties. Apartment buildings are springing up across the state and new construction seems to be everywhere. But what should be a good supply for the next several years is actually less production than what’s normally built—and absorbed—in Nevada, and both population and job opportunities keep growing. Prices and availability have already caused an uptick in people renting rather than buying.
And people have to live somewhere.
Trends in Nevada Multifamily Projects
“The forward-looking supply and demand fundamentals are still very strong in southern Nevada, and we expect that trend to continue just because we’re not building enough units right now based on capital markets, the cost of land, the cost of labor, interest rates. It’s very difficult for developers to break ground and build new apartments right now so we anticipate because we’re not building enough that the supply and demand trend will still continue strong,” said Shalonda Hughes, vice president, Colliers in Las Vegas.
Despite challenges facing developers, there’s still development of infill space in Las Vegas, and strong development in the Henderson submarket and North Las Vegas.
Multifamily properties are considered commercial real estate investment properties rather than residential. “Multifamily apartments are housing, but they’re also commercial real estate. When it comes to taxes, for example, commercial real estate has a higher tax rate,” said Jess Molasky, COO, Ovation Development. “But in other scenarios we’re labeled as housing, so it’s a blend. The really simple answer is, in order to make these projects work requires huge amounts of dollars which have to make sense.”
Basically, if someone is going to invest $50 million in a project, there has to be a reason for that. Building apartments requires capital upfront and banks aren’t going to lend all of it. So projects require investors to get off the ground. “If you’re selling homes you need to buy land, but then you start to sell the homes and then you’re building homes in that community,” said Molasky. “When you build an apartment, you’ve got to do it all upfront, so it’s just a different model that requires a large investment upfront with lenders and equity in place. It’s an investment because there’s a certain amount of risk.”
“Multifamily is considered rental apartments whereas a single owner would be condominium, so think of it as owner occupied versus a wholly owned commercial property,” said Douglas Eisner, co-founder and managing director, The Calida Group, a multifamily investor firm that both buys and builds.
Currently Nevada’s multifamily market consists of luxury or affordable apartments. Ovation Development has built 15 affordable housing communities in Nevada, bringing online almost 2,500 affordable units since 2008 with six more affordable projects under construction or in planning.
“The state has been working with us to help fund the [affordable] projects, so a lot of our efforts have shifted that way,” said Molasky. “We split our business between the market rate projects and affordable housing, and we did not start any market rates last year. If you look at some of the trends you’ll see a slow start year for construction for people who have their financing locked in and their equity locked in, but we’re facing a supply and demand issue in Nevada, and Las Vegas specifically.”
Everyone wants to pay less for housing, but when there’s not enough inventory, prices soar, meaning most residents can’t afford to buy. That leaves apartment living as an option, and at that point, there’s probably not enough apartments or affordable housing for them.
Molasky doesn’t expect rents to go up or down much in 2025, but expects a fairly flat year. “If there was more supply we would see rents coming down, but in this last cycle we didn’t get enough supply, so with the supply and demand imbalance I would expect that by the end of 2025 it will either be flat or up, and in 2026 we’ll see rent increases because there’s not enough supply.”
“It’s hard to build right now because construction costs went up substantially, labor went up substantially, we don’t know what’s going to happen with tariffs and material costs. The Fed keeps lowering interest rates but long-term interest rates which is what we need for our projects have stayed steady or if not, have gone up,” said Molasky. “So when we’re trying to make a market rate pencil on paper, it really doesn’t yet.”
Because of that, Ovation focused on affordable housing in the current market cycle, building affordable senior housing (195 units coming online in May) and Decatur Rome, an affordable housing community of tiny homes.
In northern Nevada, inventory of single-family homes is low. In the past, “Typically it was two to 3,000 units a year delivered of new inventory. This year in 2024 I think they were projecting at the end of the year to get 1,500. Not quite half, but maybe 60 percent of what we typically get,” said Kreg Rowe, founder and managing partner, Tanamera Multifamily. “Now we’ve got all this growth coming to the marketplace and all these jobs coming and obviously those jobs are going to mean more people coming to the area. They have to have a place to live. ”
In northern Nevada there’s a pretty active pipeline for construction, and for properties in the pipeline for entitlement and approval processes.
“All those properties in the pipeline for future construction, they’re all pretty much on hold right now, because the cost of construction and interest rates mean making smaller deals,” said Kenneth Blomsterberg, senior managing director, investments, Marcus & Millichap. “As far as markets pipeline, there’s close to roughly 3100 units under some form of construction.”
That could mean from ground up to lease-up, and there’s almost the same number in projected future development that are on hold until interest rates and construction costs come down. Of the 3,000 initial units, there’s a handful currently under lease-up in Reno with absorption of 14 or 15 units a month. Of the 3,000-plus coming, there are 11 projects, and eight or nine of those should have units coming online, ready for lease-up, in 2025.
“Our market is trying to build to the expected population that’s coming with the job growth,” said Daniel Winrod, senior associate, Marcus & Millichap, referencing growth the Economic Development Authority of Western Nevada (EDAWN) is expecting just east of Reno at the Tahoe-Reno Industrial Center (TRIC).
“The cost of construction has been limiting both for hard costs, labor costs, and also interest rate environment made it tougher for developers to build. But there is a potential that, as new jobs continue to trickle into the market, for there to be a shortage built. With what’s being built currently, there’s definitely enough supply to fit the demand,” said Winrod.
Costs and Considerations
Outside the low income projects, Class A luxury is pushing for the highest rents possible because there’s no other choice. With construction, material and labor costs so high, “There’s no way to build to a lower degree without the owners finding themselves unable to cover their costs,” said Winrod. “We’ve definitely seen a trend where there’s been some softness of rents over the past 12 to 18 maybe 24 months at this point. With upcoming job growth we’re anticipating that will subside and we’ll see more people moving in and higher wages supporting higher rents that will kind of offset it.”
Winrod calls the northern Nevada apartment pipeline healthy with the numbers under construction and those not yet building. The total delivered may not be the same if projects aren’t completely built out, but those completed should hit the market in the next 12 to 24 months.
“I’m bullish on Sparks right now,” said Rowe. “Sparks has a lot of opportunities for growth just because of what’s going on at TRIC. There’s a lot of job growth coming to this marketplace, a lot for the size of this market over the next four years.”
But because of inflation, interest rates, issues dealing with banks and requirements for building, over the last couple years a lot of projects have put the brakes on. “So everybody looks at it and says there’s all these apartments going on everywhere,” said Rowe. Industry reports will reference 15 projects under construction with 4,000 units. In reality it’s a question of how many of those have been delivered already, how many more will be delivered and when. The reality in Reno-Sparks for 2025 could turn out to be 926 units delivered to the marketplace.
“And when you look at projects said to be in planning stages, what does that mean?” Rowe asked. It might mean someone owns entitled property, or is designing something, or is on hold. Based on Tanamera’s findings, as little as one project could go into inventory for occupancy in Reno in 2025. “That means there’s nothing, and we expect in the next four years there’s going to be as many as 30,000 new jobs here.”
Colliers tracked approximately 4,700 multifamily units delivered in southern Nevada in 2024, and 5,800 currently under construction; 4,100 units should be delivered in 2025.
Which sounds like a lot. “It’s not,” said Hughes. “We keep looking at our population in southern Nevada. For the last 20 years, on average, developers would bring about 6,000 units to market annually. So we’re under that historical average right now on new construction and new supply.”
Which makes it seem like new apartment projects would fill completely during the lease-up stage. But that’s not happening. The vacancy rate stands at 6 percent, which is considered healthy and expected to decline as fewer units come online in 2025. “With the amount of supply that we anticipate to be delivered we think that vacancy rate will decrease just because not enough supply is coming online,” said Hughes. “We’re at a healthy vacancy rate, 6 percent, and we’re seeing that trend down.”
Ovation had 1,000 market rate apartments come online in 2024. One project is leased to 90 percent, another to 80. “For us 21 move-ins a month is average so about 7 percent growth in occupancy per month for our lease-up period,” said Molasky. “About what we expected in our pro forma. We have about 30 a month so it’s a little bit slower than [our per forma] but not significantly.”
“Nevada is doing very well,” said Eisner. “We think Las Vegas MSA is, if not the strongest, one of the strongest in the western states. Contrary to popular belief, it does not have a huge supply problem and what supply is under construction is going to drop like a rock next year. If you look at the construction starts, there is very little last year, very little the year before, and so what is in the pipeline is getting completed and there’s going to be a real shortage starting next year.”
That said, Eisner believes the fundamentals of Nevada’s multifamily industry are stronger than those of many neighboring states and are only going to improve in the next couple years because of supply and demand. There was a big spike in supply starting in 2021, above-average supply. But starting in 2022, and continuing in 2023 and 2024, supply started dropping off with projects that were in the pipeline being delivered.
“The delivery area is still pretty high relative to historical norms. They’re still getting absorbed well and we still have a lot of population growth,” said Eisner. “But starting later this year, early next year, the delivery schedule really drops off and there’s no starts behind it. Or there’s very, very low starts behind it.” With the population continuing to grow, he expects demand will outstrip supply. Whether or not new development comes online largely depends on what interest rates do.
During the pandemic slowdown, commercial real estate in general was hurt—retail, hospitality, and especially office suffered. Those markets are coming back, even office. But apartments, while they weren’t impervious to issues, fared well through the pandemic.
“Maybe [the pandemic] kept rents from rising [and] the vacancy rate a little higher, just when the market was really rocking and rolling. Prior to the interest rate increase at the latter end of 2022, there were a lot of deals transacting and a lot of activity,” said Blomsterberg. “When interest rates started rising, [investors pulled back] a little. ‘Let’s wait for the market to turn around and become better.’ But apartments have always been something where people need a place to live, and always been the product types, the stronger assets, for investors to have.”
