Nationally, vacancy rates are projected to creep up in 2025 along with moderately positive rent growth.
Cap rates have flattened, while interest rates remain elevated and volatile, employing negative pressure on property values. As a result, the northern Nevada multifamily market is rebounding. To the point, only five properties traded in Q1 2025 versus seven trades in Q4, for a total sales volume of $19.09M versus $132.25M respectively. The largest sale of the quarter was the Roselake Apartments at 3050 Lakeside Drive (80 units), which sold for $11.80M ($147,500 per unit), with a 5.69% cap rate.
On the list side, 19 properties are currently on the market (5 to 129 units) with an average price per door of $192,338 with cap rates averaging 6.08%. Apartment vacancies remain low; of the properties that Johnson Perkins-Griffin tracks, the overall vacancy rate decreased to 2.66% (-50 basis points) while average rents increased from $1,656 in Q4 to $1,681 in Q1. Other properties (20+ units) in Reno-Sparks would show the vacancies much higher, above 7 percent.
According to JPG, “although the overall vacancy rate for the entire market has remained low, it is recognized that there are currently several new projects that are taking a prolonged amount of time to reach stabilization at 90% occupancy. For several of these projects, construction is complete, and occupancy is nearing or above 80%; as these projects are absorbed a shift in the overall market vacancy may be observed. Just over ±1,350 apartment units are currently under construction in the Reno-Sparks market, and just under ±4,450 apartment units are currently in the planning stages.
Mortgage rates will likely decline in 2025, though the extent of the decline is uncertain. Fannie Mae expects rates to end 2025 around 6.3%, and the Mortgage Bankers Association predicts a 6.5% average by year-end. However, these forecasts are subject to change based on economic factors and market conditions. The federal funds rate range currently sits at 4.25% to 4.50%, after the Fed opted to maintain the rate after its January 2025 meeting. Few experts are anticipating any rate cuts, most projections are pointing toward a total of two rate cuts — but later in the year – likely not until June. The good news is that Treasuries have been trending down since January, however current rates remain steady in the mid to high 6% range.
With solid fundamentals, multifamily remains the most preferred asset class in 2025. The Reno multifamily market remains strong with economic development, increased rents, sustained occupancy and buyer engagement.
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