The Next Construction Slowdown?

In the age of foreclosures and excess housing inventory, no one has built much in the Valley these past few years—with one significant exception.

As people ditch the albatross of their underwater homes, they have moved into the rental market. That made for a mini-boom in apartment construction. Between 2007 and 2010, builders added more than 14,000 apartment units in Southern Nevada, a number almost identical to the figures from 2003-06, when everything was booming.

But now building appears to be slowing down. Only 555 apartment units were built in 2011, according to the research firm Applied Analysis—way down from the 2,324 built in 2010.

Why the slowdown? It appears that the flight from single-family homes has slowed, and the people looking for an apartment have found one. Occupancy rates have climbed to nearly 93 percent—close to the 10-year average, which means the market has reached a sort of equilibrium. With population growth almost stagnant, additional units may not be necessary.

Still, says Applied Analysis principal Brian Gordon, land and lower overall development costs may get developers thinking of building again. Especially if the economy perks up and Las Vegas gets back to what it used to do best: persuading people to move here.