Much of the new multi-family housing construction in Washoe County these days involves condominium development. Right now, there are few — if any — large apartment projects on the drawing boards. Up until this year the net new inventory has grown between 1,200 and 1,500 units per year on average. In 2006, net new inventory may even be negative.

Currently, there is only one new apartment construction project of any size, namely, the Horizons at South Meadows in South Reno. This, coupled with condominium conversions, makes for tight inventory and high occupancy.

Indeed, owners of many sites that have had approvals for apartment development are now shifting to condo projects. This is due to the fact that an apartment builder generally can only afford to pay $10,000 to $12,000 per unit for their land. On the other hand, there are closed sales of sites to condominium developers for $40,000 to $50,000 per unit. There are a number of apartment projects which are being marketed for condo conversions. The most notable are:

n Woodchase Apartments 324 units

n Tanamera Apartments 440 units

n Willowbrook Apartments 183 units

n Willowcreek Villa Apartments 152 units

n Silvercreek Apartments 376 units

n Mountain Meadows 131 units

Additionally, owners of several other apartment projects are considering conversion to condominiums. One of the deterrents they may encounter is the fact that the cities of Reno and Sparks both have condominium conversion ordinances. These laws prohibit conversion from apartments to condominiums if the area-wide vacancy rate is below 5 percent. Most of the projects mentioned above were originally approved at a time when the vacancy rates were above 5 percent. Furthermore, some projects were originally approved and constructed as condominiums but were always leased.

With low vacancy rates, a lack of new construction and units being taken out of the inventory mix for condo conversion, observers anticipate that rental rates for apartment units in the Reno-Sparks area will increase significantly over the next couple of years. However, the average rental rate would need to increase almost 25 percent before an apartment developer could afford to pay the same price for multifamily land as a condominium developer. This assumes there are no increases in the cost of construction; therefore, all the rental increase could accrue to the land.

John S. Wright has been a real estate appraiser in the Reno-Sparks area for over 20 years. Wright specializes in the analysis of residential subdivisions and multi-family housing projects. He has served as president of the Reno Carson Tahoe Chapter of the Appraisal Institute.