RCA in the commercial property press:

Distressed Las Vegas, Phoenix, and Miami making a comeback

Apartment Finance Today reports: For the most part, Las Vegas, Phoenix, and Miami really have nothing in common but sand.

Just look at their histories: Vegas, the most modern of the three cities, was founded in 1905 and was mostly notable as an atomic bomb testing site for the Manhattan Project until mobsters built it into an oasis of gambling. Phoenix, so named because it was built on the ruins of a Native American civilization abandoned in 1450, was founded by a Confederate veteran who wanted to name it “Stonewall.” And Miami was the only major U.S. city conceived by a woman—Julia Tuttle, a citrus growing entrepreneur, who owned all of Miami’s land but gave nearly half of it to a railroad magnate to attract a train line to South Florida.

Yet in recent years, these three metros have all been linked in a tragic way—as the poster children for multifamily distress. All three markets reached dizzying heights in the run-up to the recession, then plunged to terrifying lows in 2008 and 2009. Market watchers and investors have been incredibly wary of whether any of the trio would ever be as strong as they were before the crash.

The forecasts are mixed: Vegas is the laggard, the only one of the three still truly distressed, though Phoenix continues to nurse a heavy hangover from overheated valuations. Miami is the healthiest of the three, confidently climbing out of a towering shadow of condos.

“This is just what happens in Phoenix and Miami every 10 to 15 years, and then it comes back to the surface. For Vegas, this is probably only their second boom/bust,” says Ben Thypin, a senior market analyst for global property research firm Real Capital Analytics (RCA). “When you’re investing in Phoenix and Miami, you can price in some rent growth or, at the least, population growth. Whereas in Vegas, the economic outlook is just so uncertain."

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Posted by: Hermann Lademann

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