Capital Flows Continue Strongly
into Las Vegas Multifamily Properties
Published October 15, 2019
Who is Casoro Capital and what is your investment strategy?
Casoro Group is a conglomerate of a vertically integrated company that focuses specifically on the multi-housing sector, which includes apartment complexes, student housing, and senior living. Our strategy has always been to look for value-add or new development opportunities. Historically, our company has been focused on Texas, which is where we are based, but we have also set our sights across the sunbelt.
Casoro Capital is looking to expand its investments beyond its Austin home base and into growing multifamily markets such as Las Vegas.
"Multifamily has had one of the best risk/return profiles
in the real estate sector as a whole."
Senior housing has been showing strong returns for developers.
Why is the multifamily sector so important to Casoro Capital?
Multifamily has had one of the best risk/return profiles in the real estate sector as a whole. Real estate, as an asset class is a great addition to any investment portfolio because of the negative correlations with the stock and bond markets. It’s also a great way for adding cashflow or increasing yield to a portfolio, while gaining appreciation over time. Of the four major real estate types, which are comprised of office space, industrial, retail, and housing, multifamily has seen an upward swing over the past two decades.
"In essence, the American dream has shifted
from home ownership to flexibility and mobility."
Why has it been on such an upward trajectory over this time period?
It’s been driven by demographics; mainly millennials and baby boomers. Both have shown a preference for renting over home ownership. Some of that can be blamed on the housing crisis, however, for many millennials, it has to do more so with the amount of student debt that they have after graduating. In essence, the American dream has shifted from home ownership to flexibility and mobility. For baby boomers, the reasons are more related to lifestyle. They are much more active in retirement than previous generations. To them, the responsibilities of keeping up a home is quite burdensome, therefore, an apartment better suits their more mobile lifestyles.
Millennials have created a shift in the way that developers and landlords build and market multifamily properties.
"The outlying areas of Summerlin and Henderson are particularly interesting, especially with the recent surge in housing and multifamily developments."
Popular neighborhoods such as Summerlin have caught the interest of multifamily developers and investors alike.
Why is the Las Vegas multifamily sector interesting to you as investors?
Over a prolonged period of time, it has been the fastest growing rental market in the U.S. Employment growth has been a great contributor to that growth. In addition, there is a sizable disparity in the supply and demand of housing in the region, which is also driving up rents in the multifamily sector. The outlying areas of Summerlin and Henderson are particularly interesting, especially with the recent surge in housing and multifamily developments.
"We’ve seen double-digit growth year-on-year over the last few years,
and that trend looks like it will continue."
Strong employment growth and new construction projects have contributed to the strong demand for multifamily.
What do you see as the long-term outlook for the multifamily sector in the Las Vegas and Southern Nevada region?
We see the Southern Nevada market as very strong. The number of new residents moving into the region, relative to the amount of new construction, is still very high. In addition, low vacancy rates are pushing rents even higher than today’s levels. We’ve seen double-digit growth year-on-year over the last few years, and that trend looks like it will continue. From an investment perspective, these same factors are driving up the cost of properties, which can have a major influence on how much capital we decide to allocate to this market. It’s all about finding the right balance.
What lessons from other markets do you think that Las Vegas can learn as it continues to grow and build more in the multifamily space?
As a developer, the urge to keep building may be detrimental. You never want to oversaturate the market, since that could result in decreasing values. The main lesson for developers is having steady, moderate growth. That’s not always easy to achieve, but if I were a multifamily developer in Las Vegas, I would be very selective about the projects that I choose to pursue. It’s always important to consider the basic fundamentals of real estate, which is location, location, location, along with ensuring that there is demand for your product in the market.
Developers and investors will need to straddle the fine line of supply and demand in order to see continued success in the multifamily sector.