Local real estate sector pulls ahead

Through the first half of 2012, Northwest Arkansas’ five largest commercial districts saw a 32.78% uptick in new construction permit valuations over the prior year. Cumulative new residential and commercial building projects totaled $321.625 million for the cities of Fayetteville, Springdale, Siloam Springs, Rogers and Bentonville, according to permit records from the respective cities.

Residential construction has fared well all year and June was no exception. The five cities issued 111 permits for new single family homes, keeping builders in Fayetteville and Bentonville busy. These two cities accounted for 68.4% of the new construction starts among those surveyed.

Jake Newell and his business partner Todd Jacobs have roughly a dozen new homes under construction in Fayetteville. The Jacobs Newell company focuses on infill property near downtown. Newell said demand for their eco-friendly homes has grown over the past two years since the duo started their business.

Fayetteville issued 41 new residential permits in June with a cumulative value of $8.311 million, versus 29 new starts a year ago valued at $6.177 million.

Newell said new home costs are holding fairly steady, but he expects them to move higher as subcontractors have more business now and building materials are trending higher.

Bill Burckart, a veteran homebuilder in Bentonville, also agrees new home prices will trend upward as contractors have been able get better deals on land costs in recent years a result of lots taken back by local banks.

Burckart said new home buyers are seeing the bottom pricing now, but the inventory of available bank-owned lots has nearly evaporated in the best areas. There are still lots available in areas like Cave Springs and other rural settings off-the beaten path, but the most desirable locations are picked-over, according to Burckart. He said when new development begins the price of new homes will surge overnight, which makes now a great time to purchase a new home.

“I have stayed pretty busy with custom homes in the past year or so, there really isn’t much speculative building going on right now as lenders and builders are far more cautious than in past years,” Burckart said.

Brent Hanby, co-owner of Encore Flooring and Building Products in Springdale, said the sentiment he hears from movers, lenders, builders and subcontractors is the market is busier and more healthy than it has been in several years.

“I do know there is a smaller pool of builders but they are staying pretty busy and selling what they finish. There are no surpluses building up that I have heard about. But we sure don’t need to see lawyers and pilots building houses like they did in the heyday,” Hanby said.

He said investors who own rental properties are also building more duplexes and rentals particularly in Fayetteville with the growth of the University of Arkansas’ enrollment the past of couple of years.

Hanby said while the economy overall appears to be slowing down, this region continues to see benefits from the “Walmart effect”.

“The hefty run-up in stock price for Wal-Mart shares over the past three months has added to the wealth to lots of local shareholders, strengthening their balance sheets and confidence among lenders,” Hanby said.

Burckart said the Bentonville new home market has been resilient and he also credits that in part to the 1,400 or so high pay jobs in the vendor community that call Bentonvillle home.

He said new home prices in Lochmoor Club are still bringing around $135 per square foot. In Allencroft, an area that originally sold new at $110 per foot, prices are holding steady at about $100 per foot. He said a few foreclosures had caused prices there to soften a bit in the past three years.

Bentonville issued 35 new home permits in June, four more than a year ago. The valuations totaled $8.94 million, up from $6.52 million in June 2011, according to city records.

In the middle of the region, building is a little softer. Springdale issued 12 new home permits in June, with a value of $3.776 million. Building activity has picked up from 9 permits worth $2.729 million a year ago. Overall this year new construction permit values are up 114% from the first half of 2011 in Springdale.

Rogers also saw a slightly busier June over last year issuing 19 new home permits with a value of $4.1 million, versus 16 permits worth $ $3.36 million a year ago. In the first half of 2012, Rogers saw a 3.92% decline in permit values from the year-ago period.

Siloam Springs, a much smaller market, issued 4 new home permits in June, compared to one a year ago. Siloam Springs continues offer one of the lowest cost per square foot in Northwest Arkansas.

The residential market is ginning at a sustainable pace according to local economists and a few large non-residential projects and major road construction from Bentonville to Fayetteville have also kept commercial contractors hopping.

Fayetteville, Bentonville and Rogers together issued a handful of large commercial permits in June. The largest permit went a parking deck for the Maple Street Apartments in Fayetteville — a project valued at $8.17 million. The retail sector added three notable projects including a $7.92 million parking deck for the 21c Museum Hotel near downtown Bentonville. Cabela’s in Rogers got a $650,000 boat storage permit issued. And Academy Sports and Outdoors is in the midst of building a second store in the region — $7.6 million — located at 3864 N. Steele. Blvd. in Fayetteville.

Permit Comparisons
(January through June)
Fayetteville
    2012: $142.467 million
    2011: $78.196 million
    82.19%

Bentonville
    2012: $94.435 million
    2011: $75.841 million
    24.51%

Springdale
    2012: $40.152 million
    2011: $18.682 million
    114%

Rogers
    2012: $42.865 million
    2011: $44.615 million
    -3.92%

Siloam Springs
    2012: $1.706 million
    2011: $24.881 million
    -93.14%
(Permits are for new construction, additions and remodels are not included.)