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November 13, 2018

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Apartment developer talks state of Las Vegas rental market, risk of on-site retail tenants

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L.E. Baskow

Rodman Jordan of Centura Development Co. is heading up several apartment projects in Las Vegas, such as one shown Tuesday, Aug. 9, 2016, at Fort Apache Road and Hacienda Avenue.

Las Vegas apartment developers are some of the busiest builders in the valley, opening projects that often charge above-average rents and offer a big menu of amenities.

Locally based firms including Nevada West Partners and the Calida Group account for much of the construction, but now a group out of Dallas is getting in on the action.

Abode Properties is looking to develop four apartment complexes in Las Vegas: two in the southwest valley, one at Windmill Lane a block east of Las Vegas Boulevard, and one on Spring Mountain Road just west of Interstate 15 in the Chinatown area.

Clark County records show plans for 308 units at Fort Apache Road and Hacienda Avenue, 421 units at Buffalo Drive just south of Sunset Road, and 471 units at Spring Mountain and Polaris Avenue. Plans are expected to be filed for the Windmill project in the next 30 days, said Rodman Jordan, who is leading the company’s projects here as its contract developer.

Abode owns the southwest valley sites and is under contract for the other two, he said.

Like other apartment developers, the company would offer no shortage of amenities. Jordan said he could not discuss the Chinatown-area project or the broader topic of urban versus suburban, but county records show plans for a 2,300-square-foot restaurant, bar and retail section at Spring Mountain and a 4,650-square-foot fitness center. Jordan said the Buffalo project would have a jogging path, a rock-climbing wall and retail space that he hopes to fill with a bike shop.

Amid the surge in construction, more than a few real estate pros have questioned whether investors are overbuilding, especially in the southwest valley. Some 3,000 apartments hit the market valleywide last year and 4,500 are expected this year, CBRE Group broker Spencer Ballif has said.

All but a few projects are in the suburbs. In urban areas, developer Jonathan Fore is building a rental complex on Spring Mountain just west of Abode’s site, and the Wolff Co. and Downtown Project are building a rental property at Fremont and Ninth streets downtown, next to Atomic Liquors.

Jordan, founder of Centura Development Co., met with the Las Vegas Sun this week to talk about his projects and the valley’s apartment market.

Edited excerpts:

Most apartment construction in Las Vegas is in the southwest valley. Did you think there was too much in that area?

We weren’t afraid of the size of the market or what’s scheduled to be delivered in the southwest. We would rather have been the first in the pipeline than toward what looks like the end, but it’s OK. First of all, a 3,500-unit-per-year absorption in Clark County has happened regularly in its history, so what you’re talking about is a one-year supply jumping into the market all of a sudden after six years of nothingness. Also, what’s unique is that, by coming in when we did, we got to see what subcontractors were doing with their pricing.

Were prices going up, down, staying the same?

There was talk about escalating prices, but what happened was there were no new announcements since all these projects started. Prices are getting competitive again because subcontractors don’t have that third or fourth project in the pipeline.

As far as I can tell, most apartments being built in the valley do not have a commercial component.

No one wants it because it’s a burden, and apartment developers don’t know what to do with it, by and large. The retail component brings a level of complexity that a lot of developers want to avoid. It can create a more activated experience for tenants if it’s done well. But if it’s done wrong, it could hurt the facility — some third party would operate something that could work to the detriment of a residential project.

Depending on the retail tenant, could it scare renters away?

Sure. Let’s just say you have a project with a bike shop in there, and the next thing you know the bike shop subleases the space to, say, a doggy-grooming company. Then all of a sudden, the apartments smell like flea shampoo.

Overall, what are the pros and cons of Las Vegas’ rental market right now?

I think it’s a really balanced market, it’s very healthy. I’m comfortable with the amount of new supply, and the demand is there. The jobs are there, too. I just attended a UNLV mid-year economic report. They had all these slides showing that our jobs have recovered to where they were before the economic collapse. You know what else is good about this labor market recovery? It’s not construction-related jobs. Construction is the bubble — but right now, construction jobs are at a very healthy 30-year average.

What, if any, weak spots do you see?

The transient population. That’s always going to be a weak spot because apartments do well with renewals. Apartments would like for you to move in and never leave. With so much churn, that’s wear and tear on the buildings, and it requires a lot of administrative effort after a tenant leaves.

As you were looking around town for project sites, what did you think about land prices here?

Deceptive. It’s all about civil improvements and the cost of really utilizing this land. The dirt prices have little bearing on what it actually costs to bring the land to construction. It’s a dangerous market for people to dabble in unless they really understand the consequences of this complexity, because you could make a bad mistake.

Like buy a $500,000 worthless piece of dirt?

Yeah, that happens all the time. When you drive around and you see the vacant land, that’s them. Calida, Jonathan Fore and other savvy, local developers have gotten everything that’s worth getting. I don’t think you’re going to see much more sprawl for multifamily.

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