Tourism, Construction, and Healthcare Industries Lead Strong Growth in Las Vegas
HUD’s Comprehensive Housing Market Analyses provide information on changes in local economies, housing markets, and populations and provide 3-year forecasts for demand in the area. This article is part of a series that sheds light on the content of these analyses.
The Las Vegas-Henderson-Paradise, Nevada Housing Market Area (Las Vegas HMA), located at the southern tip of Nevada, consists of Clark County and is centered around the city of Las Vegas. The HMA has a population of approximately 2.23 million. A recent Comprehensive Housing Market Analysis highlighted the economic and housing market activity in the Las Vegas HMA.
Leisure and Hospitality Sector Is the Driving Force of the Local Economy
Tourism drives the economy of the Las Vegas HMA, which is home to the nation’s largest casino and gaming industry. The leisure and hospitality sector accounts for 29.6 percent of total nonfarm payrolls in the HMA. The sector includes 6 of the 10 largest employers in the area, the biggest of which is MGM Resorts International, which employs 56,000.
The HMA hosted 42.2 million visitors in 2017, down 2 percent from 2016 but still higher than the prerecession high. Total gross revenue from the gaming industry in 2017 was $9.98 billion — the second-highest annual figure on record, behind only the 2007 total revenue of $10.89 billion.
More Jobs and a Declining Unemployment Rate
The Las Vegas economy, which is centered around tourism, was hit hard during the housing recession as consumers spent less on tourism. However, since 2011 the area has seen payrolls increase and the unemployment rate decline each year. Job growth in the HMA has further accelerated since 2014, with nonfarm payrolls surpassing the prerecession high in 2016. In 2017, total nonfarm payrolls increased by 28,900 jobs, or 3 percent, to 978,100, which is much higher than the national average of 1.7 percent.
The Fastest Employment Growth Is in Construction
Over the past year, payrolls increased in every sector except the transportation and the utilities and information sectors, which declined by 2.9 and 0.9 percent, respectively. The construction sector led job growth in 2017, adding 8,400 jobs, an increase of 15.1 percent, because of significant increases in residential and nonresidential construction. These numbers are welcome news for the sector, which saw precipitous declines in employment during and after the recession. From 2008 to 2010, job losses in the construction sector accounted for 47 percent of all job losses in the HMA, and the sector continued to lose jobs through 2012. Since 2012, however, residential and nonresidential construction activity has grown, and employment in the sector has increased by an average of 17 percent annually. Large construction projects include Project NEON, a $1.5 billion interstate expansion project to be completed in 2019, and Las Vegas Stadium, a $1.9 billion project to be completed in 2020.
The Education and Health Sector Sustained Growth Since 2000
The education and health services sector has been the HMA’s fastest-growing sector since 2000 and the only sector that has not lost jobs during this period. Since 2000, an influx of retirees has fueled population growth in the HMA, and the healthcare industry has responded by developing new facilities and expanding existing ones. One project, Henderson Hospital, began in 2014 and completed its first development phase, called Union Village, in 2016. Future phases, which will total $1.2 billion and provide 12,000 permanent jobs, include a skilled nursing center, long-term acute care facilities, office buildings, senior housing, and retail.
Strong Growth Over the Next 3 years
Employment growth is expected to continue during the next 3 years, led by the tourism, construction, and healthcare industries.
Increased Permitting Still Lower Than Prerecession Average
The Las Vegas HMA was one of the hardest-hit markets during the recession, in part because of substantial overbuilding in the mid-2000s; between 2002 and 2005, an average of 27,950 homes were permitted for construction. The recession stalled many large-scale community projects, and single-family home construction continued to decline until 2012. Since 2012, permitting has increased every year, and large-scale projects have resumed, at least in a scaled-down form. In 2017, 9,800 single-family homes were permitted, an 11 percent increase from 2016.
Balanced Sales and Rental Markets
The sales market is currently balanced, with reduced single-family home construction, increased population growth, and investment activity helping to absorb the excess inventory created during the housing crisis. The vacancy rate is 2.5 percent, down from 6.2 percent in April 2010, which was then the second-highest vacancy rate of all MSAs in the United States. In 2017, existing home sales in the HMA totaled 53,400, a 12 percent increase from 2016.
Demand is estimated for 37,000 new homes. The 5,300 homes currently under construction and a portion of the estimated 48,450 vacant units will help satisfy some of the demand during the forecasted period.
The rental market is currently balanced, with an overall vacancy rate of 6.6 percent. When the recession hit, many owners converted single-family homes to rental units, and in 2016, single-family homes made up 40 percent of all rental units in the HMA. The apartment market is also balanced with a vacancy rate of 5.5 percent, down from 5.9 percent in 2016.
Demand is estimated for 16,750 new market-rate units. The 4,150 units currently under construction will help satisfy demand for rental units during the forecast period.