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Analysts: Quarter of Proposed Condos Built

13 October 2005

by Jennifer Robinson

LAS VEGAS -- Real estate analysts predict that perhaps a quarter of the nearly 200 condominium towers proposed in Las Vegas will be built.

So who are the consumers who will help these projects succeed? Real estate broker David Ezra has a few clues.

Through his High Rise Preview Center at the Fashion Show mall on the Strip, Ezra and his sales agents sell an average of about 100 local luxury condominiums a month. That buyer traffic has helped Ezra develop a high-rise customer profile.

First, he said, more than 95 percent of luxury condo buyers in the local market aren't actually from the local market. The No. 1 feeder market, responsible for roughly half of all buyers of local condos, is Southern California. In second place is Florida, perhaps via New York. Ezra speculates that Empire State residents who invested in Miami and other Florida markets in the past decade are turning their attention to Las Vegas because they believe Florida markets "have crested."

"If this were a baseball game, Las Vegas would be in the third inning," Ezra said. "These buyers have a taste for home runs, and Las Vegas is that next progressive market."

About 15 percent of local buyers are international, hailing mostly from Europe. Ezra's staff reflects that global client base: His 15 agents are fluent in 13 languages.

The buyers Ezra sees are also well-established in their careers. They typically range in age from the mid-30s to the late 50s and have an annual income of at least $100,000. More than 90 percent of them have a net worth of at least $500,000, and many have invested in real estate in other markets.

But a good portion of local condominium buyers aren't even individual consumers.

Ezra said about 15 percent of the market's buyers consist of global corporations -- the major software designers, clothing companies and electronics makers whose executives frequent Las Vegas for big conventions such as Men's Apparel Guild in California and the International Consumer Electronics Show. The corporate market is growing so quickly that Ezra and his agents now actively pursue it. Corporate buyers fit especially well in condo-hotel projects, which allow owners to lease out their unoccupied units through a rental pool. Residential towers, which focus on buyers who intend to use their homes rather than rent them out, more frequently attract primary- and vacation-home buyers.

"During conventions, these companies have to rent larger hotel suites. But if they own a (condo-hotel unit), they have more space, and they also have a balcony, a kitchen and plasma TVs," Ezra said. "They need to be here three or four times a year, and when they're not here, their unit is a corporate asset. They get a check (for rent)."

Buying patterns at the High Rise Preview Center also reveal the most sought-after locations among condo consumers. Though property on the Strip is No. 1 "now and always," Ezra said, a battle for No. 2 is shaping up between downtown Las Vegas, where SoHo Lofts, Newport Lofts and Sandhurst are in various stages of planning and construction and the south Strip, where Loft 5, Boca Raton and Park Avenue are under development.

Downtown's advantage is "a mayor who is a huge proponent of high-rise development and urbanization," Ezra said. The south Strip's benefit is that it's a "clean piece of dirt" with swaths of empty land available for development. Ezra gives the edge to downtown if a professional sports team relocates to Las Vegas and opens a stadium near the city's center -- a development Las Vegas Mayor Oscar Goodman has long encouraged.

Buyers also show clear preferences in the type of unit they're seeking.

Studio units of about 600 square feet are the most popular among buyers in the condo-hotel segment, while buyers of residential condos are purchasing mostly units of at least 1,100 square feet. That will change, Ezra predicted, as developers attempt to build more units per acre to defray land and construction costs. Residential units will drop to an average of 600 to 900 square feet because developers know that "people will give up square footage for a view and a lifestyle," he said.

Sarah Prinsloo, president of Related Prinsloo Realty Services and a broker for the Related Cos.' Icon and Las Ramblas projects, said the downsizing of units is already evident in the local market. At Park Towers, the Irwin Molasky development that helped launch the local high-rise market in the late '90s, the smallest units were 2,150 square feet, Prinsloo said; at Icon, the biggest units will be 1,824 square feet.

Ezra said he also expects bigger shifts in the type of high-rise developers deliver locally in coming years. About 65 percent of today's projects are condo-hotels, with residential towers taking up the remainder of the market. That percentage should reverse itself within three to four years as local professionals who live in high-end suburban areas watch condos come to fruition and see an opportunity to live closer to both work and the resort corridor.

"The first wave of buyers consists of investors who know these properties are great investments," Ezra said. "The second wave consists of people who need to see the towers erected. They need to walk into a gorgeous lobby and see it and feel it. As investors put their units on the market in coming years, that second wave will buy and you'll start to see a community develop."

Bea Goodwin, director of marketing at Sky Las Vegas, agreed with Ezra's assessment of the city's typical high-rise customer.

Like the people touring the High Rise Preview Center, about half the buyers at Sky Las Vegas are from Southern California, and most of them are between 30 years old and 50 years old. Nineteen states and three countries are represented among Sky Las Vegas' clientele. In addition, prices at Sky Las Vegas, which range from around $600,000 to $5.5 million, mean that the Strip tower's buyers are "affluent and highly successful," Goodwin said. And because Sky Las Vegas is a residential tower, about a third of the 409-unit building's buyers will live there full time. Among them: several local doctors, Strip-based service workers and a professor at the University of Nevada, Las Vegas.

Goodwin said Sky Las Vegas is 80 percent sold -- including roughly 35 units sold through Ezra's High Rise Preview Center -- and the tower is under construction.

At the 514-unit Icon, which is about 70 percent sold, 40 percent of the buyers come from California, while 25 percent hail from Florida, Prinsloo said. She attributed Icon's popularity among Floridians to Related's experience in the Sunshine State, where Prinsloo said Related is the biggest high-rise developer.

Ezra said such name recognition is an advantage to developers with successful projects in other markets.

"You're buying the developer above everything else," he said. "You're buying their ability to finance their project and get steel in the ground. Developers who have delivered in other markets give potential buyers here a chance to see what they've built in the past."

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