Dirt, dirt everywhere, but not a piece of land for a multifamily project. For Las Vegas, this is a major factor affecting the multifamily market, and the effects have multifamily developers frustrated, multifamily owners thrilled, and investors ready to act as soon as opportunities become available.

Though the open space surrounding this city seems endless, buildable land is actually in short supply. "Ninety-five percent of Las Vegas' Clark County is owned by the federal government, mainly the Bureau of Land Management," says Robert Schmidt, president of Theodore Roosevelt Institute, a Las Vegas and Irvine, Calif. research institute. "As our population and demand for housing continues to explode, the issue may boil down to a congressional collaboration between Nevada and other Western states that also have large parcels of federal land. Regardless, Las Vegas needs some relief."

Multifamily firms just can't resist the lure of Las Vegas, despite a few high-profile condo failures.
Sperry Van Ness Multifamily firms just can't resist the lure of Las Vegas, despite a few high-profile condo failures.

Given such pressure, the price for dirt has increased dramatically. Just a few years ago, Las Vegas multifamily developers were paying land costs of $14,000 per unit. Today, that price is as high as $70,000 per unit. Add rising construction costs (up 30 percent nationwide), and developers are left with projects they cannot afford to build, despite the demand for all types of multifamily housing in Vegas.

"It's a matter of yield," Schmidt explains. "If you're paying $600,000 an acre or more, it's hard to find the return in anything besides luxury options."