For one, the performance index--which analyzes rents in relationto occupancy--for apartment properties in the market has risen from$826 in Q2 to $834, which is the greatest improvement it's seensince mid-2006, when the shadow market started to make its presencefelt. Meanwhile, average rents alone--which has been hovering inthe $888 to the $889 range in the past year--bumped up to $890.Although that uptick is slight, it's a telling sign that the marketis on its way to recovery at a time when most others are seeingtheir rents decline, according to Christopher D. Bentley, presidentand broker of record for the firm's multifamily and hospitalitydivision.

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Concurrently, occupancy across the Valley for the three-monthperiod between July and September rose for the third consecutivequarter to 93.7%, up 80 basis points from June and 20 from the sameperiod last year. The multifamily sector is beginning to pulltenants away from the shadow market, where rents are averagingabout $200 more per month than traditional apartments. There's alsothe risk of having to move out of shadow residences in the event ofa foreclosure.

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"Over the last few years, our biggest competition was the shadowmarket," says Bentley. "It was putting quite a bit of pressure onthe apartment market, which should have improved during the bubblemuch more than it did. Now, the investors are giving the shadowinventory back through foreclosures and sales. Though that's anegative for single-family housing, it's a positive for themultifamily market because we're gaining back that renterinventory. So what was a negative a few years ago for us is now apositive."

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Also of note is the fact that this improvement is occurring inthe face of significant job losses. Bentley points out that themarket has lost about 12,000 jobs to date, and so far, occupancyhas followed suit. This is the first time occupancy has risendespite the decline in employment.

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The market isn't completely rosy, though; Bentley concedes thatlandlords are offering concessions. The good news is that thoseincentives are more commonplace in the class C product, rather thanclass A or B. "New lease-ups are fantastic in the A market," hesays. "For both traditional renters and those who sold their homesat the right time, going down to a C-type product is too much of ajump. We're seeing more demand for the A product."

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For investors looking for deals in the market today, they arefew and far between. According to Bentley, "there are a lot ofdistressed property funds that are not getting the rewards they'relooking for because apartments are simply not in distress."

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Over the long term, however, the environment for multifamilyproperties will be increasingly positive, he says, due to anexpected housing shortage and corresponding surge in demand. Theexecutive maintains that the supply of residential units in thenext several years will ultimately not be able to keep up with thedemand for them.

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"We are convinced there's a housing shortage coming," heexplains. Construction funds for apartment buildings, along withsingle-family homes, are not available. Projects in the pipelinethat were commenced before the downturn hit will be completed, butvery few planned projects that haven't yet broken ground will doso.

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Once the demand rises, Bentley adds, the climate will ease a bitand developers will begin construction once again. "It's the periodbetween the stagnancy and the return on new development that isgoing to create the shortage of space," he says. "We still havejobs coming in, we still have occupancy growth and hotels areopening up. There is a fear factor that the recession will carry ona little longer than anticipated and have an impact on Vegastourism. But it's important to remember that the casino market hereis dependent on occupancy, not rates. Hotel and casino operatorswill lower rates to get people in the door. For our purposes, it'sabsolutely irrelevant how much the room goes for--if it's $200 or$500 a night, it still takes two people to make the beds. While wewish the forecast were different, at the end of the day, the jobsare still going to be there."

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It's anticipated that the market will gain about 3,500residential units by 2010, which at this pace is a shortage ofabout 13,000 units compared to demand. These conditions arecreating a climate that is very friendly to investors. The averageprice per unit in the Valley hit $120,000 per door in 2007, with apeak of $164,773. Current prices are significantly less, so thesector is more affordable. Add to that the fact that rents remainsignificantly lower than most of markets across the country. Theupside opportunity is enticing, says Bentley.

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As investors look to reap the cash from their holdings, salesvelocity should pick up next year, he states. "That's somethingthat we saw in 2002," he points out. "Velocity was downconsiderably after 9/11, and our short recession here, and itjumped back up significantly in 2003."

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Anyone who comes into the market, however, should be ready toexhibit some patience. Next year will not be a great year, saysBentley, since most of job growth that is expected will occur atthe end of 2009. "We forecast 2010 to see a significant performanceincrease, and that will last for a good three years," he predicts.Rent growth during that is expected at around 6%, a rate seen onlyin 2006 year, and occupancy is anticipated to rise to the 95% to96% range. "It will be another two to three years before thesingle-family market picks up again, and the apartment sector willflourish until that time."

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