Market Forecast: Multi-family Market Healthy, Adding Units

Real Estate Market Data Inc. surveys a total of 18,852 units in the overall Northwest Arkansas multi-family market at this time. That includes Fayetteville, Springdale, Rogers-Lowell and Bentonville.

Currently, the area multi-family market continues to be relatively healthy in comparison to year-end 2004, even with the addition of 951 units. Vacancy was 7.61 percent at mid-year 2005, which is only slightly higher than the 7.23 percent reported at year-end 2004.

Rental rates are trending higher, with one- to three-bedroom units reporting an approximate 5 percent increase over year-end 2004. Unfortunately, absorption was negative at mid-year, which is most likely attributed to the recent delivery of several new projects.

REMDI identifies at least 90 percent of the total multi-family market within Northwest Arkansas. All projects identified in the survey contain six or more units.

Fayetteville remains the largest market in the multi-family sector; however, Fayetteville’s market share may change in the coming years due to existing construction activity in the Bentonville and Rogers-Lowell markets.

Fayetteville has approximately 52 percent of the total market share of multi-family units in Northwest Arkansas right now.

At mid-year, that city’s market grew by 359 units, but vacancy fell slightly to 7.74 percent, down from 8.29 percent at year-end 2004. Fayetteville’s multi-family market remains healthy with positive absorption and rising rental rates at mid-year 2005.

The Springdale market accounts for about 22 percent of the total multi-family market and has also experienced little change in vacancy, despite strong construction activity.

At mid-year, Springdale’s multi-family vacancy was 9.62 percent, which is only slightly higher than the 9.38 percent reported at year-end 2004.

Most of that vacancy is attributable to the newer units recently added to the market. More than 400 units were added to Springdale’s multi-family market during the first half of 2005.

The Rogers-Lowell market accounts for about 11 percent of the total multi-family market, but that could soon change with more than 1,800 units planned for construction in the next one to two years. Slightly more than 100 units were added during the last two reporting periods, but a recent increase in vacancy could be cause for concern.

At year-end 2004, vacancy was a healthy 4.21 percent. However, at mid-year 2005 it had increased to 7.09 percent. Average monthly rental rates have also increased by approximately 15 percent. This change in vacancy and rental rates can be attributable to a Class “A” project recently added to the market.

Bentonville also has a large amount of planned construction, but as of mid-year 2005, this market only accounted for about 15 percent of the total multi-family market.

About 72 units have been added to Bentonville since mid-year 2004, and vacancy remains a healthy 4.26 percent. Although there are more than 1,400 units planned, many projects are not scheduled to enter the market until late 2006.

Generally, the multi-family market in Northwest Arkansas is expected to remain strong. Fayetteville should continue to dominate the overall market, primarily due to the University of Arkansas being located there.

Planned projects in Rogers-Lowell and Bentonville may cause a spike in vacancy in the short-term. However, absorption and average rental rates should continue to increase at a healthy level through the end of 2005.