Investors and international buyers are bargain hunting for existing high-rise residential condominiums along and near the Strip, according to a condo analyst and researcher.
The trend follows what’s happening in the Las Vegas single-family and town house market as well. Even traditional condo sales are being bolstered by investors who improve and flip the properties, the analyst said.
Distressed property sales account for nearly two-thirds of the condominium market in Las Vegas through the first seven months of the year, and that has contributed to prices falling about 10 percent, said Marc Ehrlich, president of Hi Rise Living, a brokerage and condominium research firm.
Through July, Las Vegas had 810 condo sales, which is three less than the first seven months of 2010 if transactions at CityCenter are excluded from the calculations.
About 520 of the 810 transactions outside of CityCenter, or 64 percent, involved a bank sale, foreclosure or short sale, 24 percent were traditional sales by owners and 11 percent were sales by developers, Ehrlich said.
The distressed-property sales number is a slightly smaller percentage than the housing market as a whole, where nearly 70 percent of sales involve foreclosure, short sales or auction.
But similar to the housing market, new condominium sales are down sharply this year. Through July, there were 103 developer sales, 92 when not including CityCenter. In the same period in 2010, there were 454 sales, 138 when not including CityCenter, which began closings in early 2010.
The biggest interest of buyers — up nearly 60 percent — has been residential high rises on the Strip or near it with 324 sales averaging $189 a square foot, Ehrlich said. That compares with 204 sales with an average price of $218 a square foot through the first seven months of 2010, he said. The properties include Allure, Panorama I & II, the Martin, Sky Las Vegas, Turnberry Place and Turnberry Tower.
The investors and international buyers are looking to purchase units for $150 to $200 a square foot, which is much less than the $450 a square foot cost to replace it, Ehrlich said.
They’re looking for significant discounts and are able to rent them pretty easily to the younger demographic who work on the Strip, he said.
“There is very little inventory available at current market prices, and there’s no shortage of buyers for any properly priced units,” Ehrlich said. “Agents are getting multiple offers in a matter of days when these units come on.”
Although sales prices of residential condos on or near the Strip are down 15 percent, condo hotel units and downtown condos are down 6 percent and the far south Strip is down 10 percent, Ehrlich said.
The interest in non-CityCenter Strip condos overshadows condominiums sales elsewhere in the valley. The 48 sales in downtown Las Vegas are 25 fewer than the first seven months of 2010. Those towers include Juhl, Metropolis, Newport Lofts, Soho and Streamline.
The far south Strip south of the Las Vegas Beltway had 165 sales, 34 fewer than the same period in 2010 for its mid-rise condos that include Boca Raton, Loft 5, Manhattan, Park Avenue and One Las Vegas. Three other condo projects — Queensridge, Platinum and Park Towers — had 34 sales, 25 fewer than 2010.
The condo-hotel market weakened further in 2011 as investors have shied away from purchasing the units they don’t consider to be a good investment. There were 239 sales in Palms Place, Trump Las Vegas and the three Signature towers at MGM Grand. Only seven of those were developer sales compared with 33 in 2010.
Ehrlich said 5,248 of 13,140 developer-owned high-rise and mid-rise condominium units remain to be sold, which equates to about 40 percent of the market.
That figure breaks down to 746 of the 2,351 units in the far south Strip; 554 of 974 units in downtown Las Vegas; 2,567 of 5,359 condo hotels; and 1,301 out of 4,231 residential condos along or near the Strip.
Among the notables among developers:
• The Martin has 271 of 372 units left.
• Turnberry Towers has 277 of 636 units left.
• Palms Place has 201 of 599 units left.
• Trump Las Vegas has 922 of 1,282 units left.
• Juhl has 306 of 341 units left.
• Streamline has 248 of 275 units left.
Through the rest of the year, Ehrlich said he expects prices and sales to remain where they have been.
The one tower that has stood out recently is the 41-story Allure, which is said to have sold 17 of its developer units in July when it had sold 31 through the first six months of the year. Allure has 70 of its 427 units remaining for sale, Ehrlich said.
“We are on track to close at least as many if not more in August,” said Matt Brimhall, Allure’s vice president.
Ehrlich said part of the reason may be Allure boosting what it pays in commission to real estate agents from 5 to 8 percent. Most developers pay 3 to 4 percent, he said. The residences start at $174,900.
As for CityCenter, its sales remain tepid about 18 months after closings began.
Vdara, the condo hotel, has 1,339 of its 1,495 units remaining. Veer Towers has 444 of the 669 units available and Mandarin Oriental has 161 of 225 units available, Ehrlich said.
CityCenter owners have yet to sell their condos on the open market, even though a few have been listed for sale, Ehrlich said. The reason is most of the owners are only listing them for a similar amount to what they paid for them, he said.
“I don’t think they’re very motivated. They are just testing the water to see if there’s interest,” Ehrlich said.
CityCenter has only sold 11 condos this year, eight at Veer Towers and three at Mandarin Oriental. Last year, when it started closings, CityCenter sold 54 units at Mandarin Oriental, 117 at Veer Towers and 145 at Vdara, Ehrlich said.
Ehrlich said he wouldn’t be surprised if CityCenter lowers its prices in 2012 to spur sales, but Tony Dennis, executive vice president of CityCenter’s residential division, said there are no such plans.
“We’re in this for the long haul and believe in the product and riding out what is a very unsettled economic environment,” Dennis said.
Even though CityCenter isn’t having much luck selling the units, it increased its presence in the rental market.
It started a rental program in fall 2010 in which it put 50 units at Veer and 50 units at Mandarin Oriental up for lease. Three months ago, that was increased to 100 units at Mandarin and 350 units at Veer Towers.
All 100 units are leased at Mandarin Oriental and 246 of the 350 rental units at Veer Towers are leased, Dennis said.
“There was a strong demand, and we wanted to populate the community to expand the business (activity),” Dennis said. “We wanted to move people in here and get it occupied.”
Of the 346 people leasing, 35 are tenants who are part of the rent-to-own program, Dennis said.
There’s no limit on how many units CityCenter will lease, but the plans are to retain units for buyers to purchase, he said. As for Vdara, the plan remains to keep those units as part of the hotel rental pool and not sell any more.
Strong demand for rentals has prompted CityCenter to bump its rents by 5 percent overall in recent months, Dennis said. Studios at Veer that had rented for $990 a month are now $1,350 a month.
One-bedroom units are $1,760, up from $1,500 and two bedrooms are $2,490, up from $2,290, he said.
CityCenter requires three months rent up front, which includes a security deposit.