A Razorback Transit bus passes by the Sterling Frisco complex construction site at Lafayette Street and West Avenue on Monday.
Photo: Todd Gill, Flyer staff
Finding an apartment in Northwest Arkansas is becoming harder, and more expensive, than it was six months ago.
Units are almost full and rents are increasing, according to findings of a survey conducted by commercial real estate brokerage firm CB Richard Ellis.
“The Northwest Arkansas apartment market had a solid performance in 2012,” said Brian Donahue, an apartment specialist with the CBRE Northwest Arkansas office in Fayetteville. “It appears as though the dip in occupancy and rental rates caused by the ‘Great Recession’ have mostly been erased.”
Occupancy hit 97 percent at the end of 2012, up from 94 percent in July 2012.
The Domain at Fayetteville is located off Martin Luther King Jr. Boulevard near Baum Stadium.
Flyer photo
The average rental rate was $572, up from $566 six months ago.
Despite high occupancy levels, Northwest Arkansas has yet to see much new construction outside of the University of Arkansas area in Fayetteville, which may have contributed to higher rental rates.
The Grove, a large-scale student apartment complex which rents bedrooms rather than units, opened in Fayetteville last fall. Three more rent-by-the-room projects – Sterling Frisco, The Domain at Fayetteville and The Vue – are each set to open before the fall semester begins next year.
Once complete, the quartet of projects will have added 823 units with 5,565 beds to the area.
What effect, if any, those complexes will have on overall occupancy and rental rates remains to be seen, but Donahue said he wouldn’t be surprised to see at least some plans for new construction surface in Springdale, Rogers and Bentonville at some point this year.
Overall, Donahue said, things are looking solid.
“With the excess supply of single family houses slowly being absorbed, steady job growth and less new apartment supply outside of the aforementioned student housing complexes in Fayetteville, we expect the Northwest Arkansas apartment market to remain strong for the foreseeable future,” he said.
Occupancy rates
Average rates as of the end of 2012.
Fayetteville: 98%, up from 96.5% at the end of 2011
Springdale: 94.5%, up from 93% at the end of 2011
Rogers: 97.5%, up from 97% at the end of 2011
Bentonville: 97%, up from 95% at the end of 2011
Northwest Arkansas: 97%, up from 95% at the end of 2011
Apartment rents
Average rents for apartment complexes with 50 or more units in Northwest Arkansas.
| 1 bed/1 bath | 2 bed/1 bath | 2 bed/2 bath | 3 bed/2 bath | |
|---|---|---|---|---|
| Fayetteville | $462 | $521 | $662 | $881 |
| Springdale | $416 | $480 | $591 | $591 |
| Rogers | $540 | $488 | $823 | $1,002 |
| Bentonville | $502 | $584 | $698 | $738 |
Source: Northwest Arkansas Apartment Market Survey for Year-End 2012. CB Richard Ellis surveyed just over 22,000 of the area’s approximate 28,000 units. The survey does not include complexes with less than 50 units.
IMO, Fayetteville should allow the market price to stay relatively high for apartments and approve fewer units. That’s one way to create incentive for the redevelopment of some of the rattier, neglected properties around the city.
I’m not sure I follow your logic. Why would slum lords fix up their dumpy properties when they have a high occupancy rate? It seems like more competition would be a better incentive for them to fix up their properties.
Higher rents make it more feasible to redevelop older properties on a profit basis. The reverse of what you propose is that if there is a glut of apartments driving down rent per unit, developers have no budget to build higher quality or renovate a deteriorating property.
Higher rents overall also encourage people to consider areas of town and properties that may currently be being passed over and neglected. Higher prices downtown are largely responsible for the spillover of redevelopment happening now in south Fayetteville.
If I have a rent house that I pay a $500/mo mortgage on, yet I can only rent it for $500/mo, I am very unlikely to do anything to the property other than routine maintenance.
If I can potentially get $1000/mo for it, I am more likely to re-invest money into it and keep it in top condition.
Slum lords need competition. Competition will force them to redevelop to compete. If they are cash flowing at high occupancy rates, why spend money to redevelop? History shows that they don’t.
Your premise does not match the historical trends in real estate and development.
I would submit that the poor condition of many of Fayetteville’s rental properties disproves your theory.
I disagree. At a minimum, higher rents lead to higher quality properties being developed. There is a reason Fayetteville is getting urban-style dense apartments with wrapped parking, and Springdale is not. A market being able to support higher rents is a big part of the reason for higher quality in Fayetteville versus Springdale.
Historical trends in real estate development show that when a market supports higher rents, better quality properties are developed.
Gluten- you are talking about two different things. Higher rents and demand are driving NEW development.
If an older property is full and cash flowing, typically a landlord isn’t going to invest in upgrades. If occupancy starts to slip, or if another owner sees more value in the property than is being realized, it may get redeveloped.
In a looser market, with lower rents, marginal properties will sit vacant. Ideally they would be redeveloped or improved, but without cashflow, an owner has no ability to make improvements.
In a stronger market, with higher rents, marginal properties are more likely to be snatched up by good developers. Denser properties are more likely to be developed.
When did Fayetteville start seeing better quality of developments: When demand was high and rent levels rose, or when properties were plentiful and rents were cheap?
A good example is the trailer park area near Poplar. Low density, very low quality development, that sat and languished for decades. It was not until developers could realize a good ROI via higher rents and higher demand that anything happened there.
I think there has always been a market for nicer properties but our uninspired slum lords just haven’t known or wanted to capitalize on it. The catalyst for nicer properties has come from developers with ties to out-of-state markets or more enterprising mind-sets that are importing some fresh ideas and willing to try things beside vomiting up another cheap and formulaic “garden-style apartment community” a-la Lindsey 8-plex.
As a community we are still woefully short of decent housing options, especially for young professionals, single adults and seniors, and child-free or empty-nester couples. Too much of our housing stock is made up of 3 bedroom 2 bath snout houses in the suburbs. Try finding a small energy-efficient home or adult couple-sized apartment within walking distance of downtown that is affordable on an average salary and tell me what you find.
I’ve been looking for two years and am sick of walking in houses and feeling like I’m drunk because the floors are like wet lasagna noodles draped over crumbling foundations. I’ve literally seen holes in walls, mold outbreaks, sewage leaks, broken windows, dangerous wiring, unvented heaters, and who-knows-what hiding under multiple layers of cheap toxic building materials. Having rented a number of dumps in this town over the years I can attest that if the rent is cheap the utilities aren’t. The difference being that the dollars paid in higher rents to landlords have a better chance of recirculating in our local economy than if we send the money to out-of-state utility companies.
When there is nothing to choose from tenants are forced to compete for the best thing they can find which too often is substandard.
Glutenfree has a point, at least in regard to one type of landlord: an owner who has the wherewithal to undertake improvements to his property, but chooses not to. I’m sure there are quite a few of them around, as many “student ghetto” properties have been owned by rental companies since the 1960s. However, a lot of properties are owned by holding companies, which are interested only in the eventual land value, and “non-professional” landlords– inheritors, injudicious small-time investors– who are just able to own and rent out their property. Their problems are compounded by lack of understanding of being a landlord and renting to young, transient tenants. Higher rents will not help these landlords because they lack the wherewithal to improve their property in order to collect higher rents.
There is some redevelopment of homes underway in neighborhoods near the University– Mark Zweig comes to mind– that includes returning old single-family homes to single-family use. One consequence of rising property values in these neighborhoods as a result of property improvements and changes in use might well be forcing less-ept landlords out of the business as rising property taxes make their ownership less and less profitable.
Another thing that might force them out of the rental business is rising expectations from students. New development is successful because students have higher expectations of their crash pads that they did when, for example, I was in college. The idea of “living like a college student” is becoming more and more middle-class.
Any landlord worthy of the appellation should know what his property is worth, what income it can dependably generate, when maintenance is needed, the return on investment of maintenance and improvement, and when the property will cross the line into unprofitability. Many rental property owners don’t know these things. Many of them will find out in a way they don’t like.
Well said…