Area building permit values up in 2011

Homebuilders and commercial construction firms registered a healthier pulse across Benton and Washington counties last year. The cumulative new building permit values in Fayetteville, Springdale, Rogers, Bentonville and Siloam Springs jumped 27.3% during 2011. The respective cites issued permits totaling $354.23 million, compared to $278.15 million in 2010.

New residential building was valued $196.4 million, up 8.8% from a year ago, among the five cities. Economist say it’s another sign the region’s economic engine is pulling toward a healthier state. (See charts below.)

Increased building also added back about 100 local construction jobs in 2011, an employment segment  hit hard in recent years. The Bureau of Labor Statistics estimates there were 8,000 construction-related jobs in the local metro area near the end of 2011, up 1.3% from 2010. Northwest Arkansas’ construction employment peaked at 12,200 jobs in June 2006.

David Crowe, chief economist with the National Association of Home Builders, said
builders are seeing greater interest among potential buyers as employment and consumer confidence slowly improve in a growing number of markets — like Northwest Arkansas. He said this has helped to move the confidence gauge up from near-historic lows in the first half of 2011.

The NAHB/Wells Fargo Housing Market Index — a metric that assesses builder sentiment — rose in January to its highest level since June 2007. The improved sentiment also noted some lingering builder caution regarding tighter lending practices and the unpredictable appraisals in areas where foreclosures remain problematic.

‘REINED IN’
Lee Scarlett, owner of Celtic Homes in Fayetteville, is optimistic 2012 will be busier than last year.

“New inventory levels are about as low as they have been in four years as banks are keeping builders reined in pretty tight,” he said.

To start 2012, MountData.com reported an inventory of 281 new single family homes listed for sale among the five cities. This supply of new homes declined 14.8 percent from a year ago amid a cautious building sector.

Scarlett is a veteran custom home contractor who has built one to two homes a year since the market tanked in 2007.

“I downsized to a sustainable level so that I could I stay in business. But based on the interest I am seeing, it’s possible I could build four homes this year,” he said.

Scarlett said overall building costs should be fairly steady as there are plenty of good deals on land and labor, while roofing, lumber and paint costs continue to edge higher. His homes average between $400,000 and $500,000, where inventory is almost exclusively custom order.

At the $150,000 level, the average cost of new construction per square foot in the two-counties was $94 in 2011, compared to $95 a year ago, according to MountData. Most of the new homes in this price range are considered speculative — built without being pre-sold. There were 96 homes listed for sale as of Jan. 15, down from 133 a year ago.

COMMERCIAL PICK-UP
Among the five cities, 2011 commercial permit values totaled $157.7 million, up  61.4% from the prior year. This hefty increase is thanks to several new schools, Crystal Bridges  Museum of American Art, and the surrounding infrastructure near downtown Bentonville.

Tom Reed, partner at Fayetteville-based Streetsmart Data, said the majority of new permits issued in 2011 were for special use, owner-occupied space. He said present occupancy levels across the commercial sector won’t likely support much building of speculative nature, unless there are a fairly high level of pre-lease agreements with tenants.

Available retail space across the two-counties shrunk from 1.1 million square feet to roughly 800,000 square feet during 2011, according to Reed. His data does not include strip centers. According to marketing firm Xceligent, local retail vacancy rates averaged 8.4% in the two-county are at the end of 2011, down slightly from 8.9% a year ago.

Analysts agree the retail segment is faring better than the office and warehouse space which are both still seeing vacancy rates of 20 percent or higher across the two-county area.

“We are still working through sluggish demand, but people seem to be encouraged to start 2012 by a recent increase in leasing agreements for existing space,” Reed said.

The local market appears to be a little healthier than a year ago, and he expects the commercial real estate sector to mirror 2011 during the first half of the year as business owners build only what they need.

“It’s not necessary to build schools every year, but corporations flush with cash are also taking this opportunity to reinvest in their own infrastructure,” he added.