FAYETTEVILLE -- Some cities in Northwest Arkansas are steadily seeing apartment complexes spring up across the landscape, and the growth doesn't show signs of letting up.
A recent report on the multifamily real estate segment in Benton and Washington counties shows growing vacancy rates with more than 6,500 rental units expected to become available in the next two years, primarily in Bentonville, Rogers and Fayetteville.
While many of the complexes built in recent years are in Fayetteville and target college students, some complexes in this next wave are aimed at young professionals who work for the region's top companies, including Wal-Mart Stores Inc., Tyson Foods and J.B. Hunt Trucking.
Sarah King, a spokesman for Fayetteville-based Specialized Real Estate Group, the developer of Uptown Fayetteville Apartments and Shops, said the apartments on Steele Boulevard in northeast Fayetteville were built with young professionals in mind. The complex opened in December.
The 308-unit complex has one- and two-bedroom apartments and is laid out in a configuration reminiscent of a small neighborhood. It's located within easy walking distance of shopping, restaurants and entertainment, and is connected directly to the region's trail system. The place is pet friendly, has its own gardener in residence and boasts environmentally friendly building practices.
Rents vary from $845 for the 408-square-foot, one-bedroom Firefly studio apartment to $2,095 for the 1,262-square-foot, two-bedroom Sunglow, which has a premium kitchen, two full baths, a spiral staircase that leads to a loft and a large covered deck, according to the company's website.
Andrew Garner, Fayetteville planning director, said the Uptown Fayetteville Apartments and the nearby Watermark apartments represent a growing trend toward more upscale apartments centered on young professionals and baby boomers. He said that while the developments have amenities and locations near shopping and entertainment areas that make them attractive, the city's tight real estate market also limits some housing options and makes upscale apartments more attractive.
Garner said there is pent-up demand for these types of rental properties in the region, adding that the city's long-range plans call for developments with walkable areas that integrate residential with commercial and retail space. He said these areas are more like traditional development patterns before Americans became focused on cars and driving everywhere for shopping, entertainment and meals.
According to the most recent issue of "The Skyline Report," sponsored by Fayetteville-based Arvest Bank and compiled by the Center for Business and Economic Research in the Sam M. Walton College of Business, multifamily vacancy rates in Benton and Washington counties stood at 4.2 percent for the first half of 2017, up from 2.4 percent for the same period last year. Experts said the 4.2 percent level is still healthy and sustainable.
Development in Fayetteville and Rogers is responsible for the bump in vacancy rates, reflecting additions of new apartment complexes that haven't yet had a chance to reach normal occupancy levels. Roger's vacancy rate was 6.1 percent for the first half of 2017, the highest in the region and up from 5 percent for the same time last year. Fayetteville's rate was 5.8 percent for the period, up from 2.7 percent from the same time last year.
Springdale had the lowest vacancy rate at 0.6 percent, down slightly from 0.7 percent; Siloam Springs had a vacancy rate of 1 percent, down from 1.7 percent for the same period in 2016; and Bentonville's rate was 1.4 percent, up from 1 percent from a year ago.
Mervin Jebaraj, lead researcher on "The Skyline Report" and interim director of the Center for Economic Research, said apartment growth is a direct result of the influx of workers to Northwest Arkansas.
"There simply isn't any way to house them," he said.
Jebaraj said that while not all of the more than 6,500 apartment units expected over the next few years will be aimed at young professionals, market pressures indicate that many of them will be. He said land costs are on the rise, and construction costs are up for a variety of factors, from the costs of importing lumber to the lack of available workers. Higher-end apartments, which can charge higher rents, are a way to recoup these costs, Jebaraj explained.
Greg Willett, chief economist for RealPage Inc., a Texas-based provider of software and data analytics to the real estate industry, said apartment growth nationally is significantly higher than in past years, noting that in the top 100 metropolitan areas across the U.S. there are 500,000 to 600,000 apartment units under construction while a typical year would see more like 250,000 to 300,000 being built.
"It's pretty aggressive," Willett said.
He said demand for high-end apartments is strong across the country. He said these apartments typically are in urban areas close to amenities and target young adults who are the nation's primary renters.
Rents, he said, depend on locations. He said class A apartments located in the top 100 metropolitan areas have average rents as low as $800 a month in Wichita, Kan., to as high as $4,700 in New York City. Willett added that when high-end apartments arrive in a region, they tend to result in a general rent increase across all categories.
In Northwest Arkansas, the average lease rate of all apartment types in the first half of 2017 was $642.47, up from $608.88 for the first half of 2016, according to "The Skyline Report." The report notes that across the two-county area there are a total of 735 apartment complexes with about 36,852 units. Fayetteville has the most apartment units with 19,401, and Siloam Springs has the least with 1,054.
Bentonville has 129 complexes with 4,986 units, so the expected addition of more than 3,200 units over the next two years is significant, increasing the number of apartments available in the city by nearly 65 percent.
In August, a Missouri-based development company said it was building a 235-unit apartment complex in Bentonville with an estimated total project cost of more than $30 million and expected to open in late 2018. It will include six, three-story buildings and will offer one-, two- and three-bedroom units. At the time Lonnie Funk, president of Affiniti Management Services, said the complex will have amenities that are attractive to young professionals who live and work in the Bentonville area.
King, of Specialized Real Estate, said the company is building a complex aimed at young professionals in Bentonville, which will include 252 one- and two-bedroom units on Southeast Third Street near the Southeast J Street intersection near where Wal-Mart Stores Inc. recently said it would build a new headquarters campus. She said the company expects to break ground by the end of the year.
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