Report Reflects on 2006?s Mid-Year Market Status (Market Forecast)

As Real Estate Market Data finalizes end-of-year data on the single-family, multi-family and commercial real estate markets in Northwest Arkansas, a review of activity in 2006 has a familiar theme.
For the past three years, planned construction has overshadowed demand and this trend may continue into 2007.
Before new numbers are analyzed and released, it’s time to review what happened in Northwest Arkansas during the first half of 2006.
Real Estate Market Data has been evaluating the real estate markets in Northwest Arkansas since 2002 and publishes The Reed Report twice a year on both the Benton County and Washington County markets.
Single-Family
As recently reported, at mid-year 2006 the Northwest Arkansas single-family market had more than 19,000 lots planned or commonly referred to as “in the pipeline.”
Also at mid-year, total home sales were down and average days on the market increased in comparison to year-end 2005.
Although the number of proposed housing increased at mid-year, the pace slowed and it will be interesting to see how many planned projects are estimated for year-end 2006.
The bulk of this planned development is located in the cities of Fayetteville, Springdale, Bentonville and Rogers.
However, other smaller bedroom communities surrounding these cities have also had a significant effect on the single-family market with growing development.
Another important statistic to keep in mind from mid-year 2006 includes just over 1,000 new lots occupied (which means a new home was occupied by an end-user).
Through examining lot activity, The Reed Report is able to measure demand in the single-family market. In 2005, there were just over 2,500 new lots occupied in both Benton and Washington counties, and that was a minimal increase from 2004.
In Washington County in 2005 there were about 1,414 new lots occupied.
As of mid-year 2006, that number was about 378.
This is a strong indication of a slowing housing market.
A little more positive news came in Benton County. At mid-year 2006, 682 lots were occupied in Benton County. This appears to reflect demand as strong as 2005, if the second half of 2006 keeps the same pace.
While the single-family markets cool, the condominium market in Northwest Arkansas has been a popular topic.
This market has been a viable alternative for developers seeking other housing projects due to rising land costs.
With many developments under construction with planned completion dates in 2007, especially in Fayetteville’s central business district, it will be exciting to watch.
Multi-Family
At mid-year 2006, The Reed Report tracked about 21,053 multi-family units in Northwest Arkansas. This market remains very healthy, even with nearly 3,400 units under construction.
The Fayetteville market has almost half of all multi-family units in Northwest Arkansas, but Benton County has the bulk of multi-family construction in the cities of Bentonville and Rogers.
Overall stabilized vacancy in the Northwest Arkansas multi-family market has remained near 5 percent in the past year.
Commercial
The Northwest Arkansas office market has certainly been overshadowed by an oversupply of product, mostly in Benton County.
Demand has remained solid but overall vacancy rates have been high due continued construction.
At mid-year 2006, the overall office market had an approximate 15.2 percent vacancy.
The Fayetteville market has been one of the best performing markets in Northwest Arkansas, and at mid-year 2006 all markets slightly improved in Class A office space.
The Class B office market had negative net absorption and slightly higher vacancies at mid-year.
The overall office market is expected to continue experiencing higher vacancy rates due to continued deliveries.
Even the Fayetteville market, which has been healthy in recent years, may have increased vacancy at year-end 2006 due to added inventory.
Unfortunately, with an oversupply of space available to lease, lease rates are not expected to increase significantly in 2007.
After construction slowed somewhat in the office-retail market in 2005, it heated up once again during the first half of 2006.
With a significant amount of space under construction, once again in Benton County, this market is not expected to improve dramatically in the coming year.
Overall vacancy rates in the office-retail market at mid-year 2006 were about 13.1 percent.
The retail market has been healthy in recent years and at mid-year 2006 it had an overall vacancy rate of about 7.2 percent.
With recent retail deliveries in the Rogers market and continued construction in Fayetteville, this dynamic market will be exciting to watch in the coming year.
Average rental rates slightly increased at mid-year 2006 but with continued construction deliveries, those rates may flatten.
The Reed Report has also started tracking the medical-office market, and at mid-year 2006 it had a healthy vacancy of 7.4 percent.
Other markets, such as the industrial and hotel markets are also being monitored as ongoing construction may cause concern in coming years.