Apartment projects send Northwest Arkansas January building permit values up 211%

Two large apartment complexes in Fayetteville and an increase in new home permits pushed new construction permit values to more than $129.08 million in January in Bentonville, Fayetteville, Rogers and Springdale, well ahead of the $41.453 million in the same month last year.

The four cities’ combined had commercial permit values of $96.85 million, compared to $19.733 million in January of 2015. The bulk of that total was in Fayetteville in the two new multifamily housing projects now underway near the Northwest Arkansas Mall. (The values in this story are new construction only and do not include alterations and additions to existing properties.)

New Construction Permit Values (January – residential and commercial)
Bentonville
2016: $18.74 million
2015: $17.66 million
6.11%

Fayetteville
2016: $88.18 million
2015: $3.30 million
2,572%

Rogers
2016: $16.79 million
2015: $14.12 million
18.9%

Springdale
2016: $5.37 million
2015: $6.363 million
-15.60%

NORTH FAYETTEVILLE BOOM
The Uptown Apartments will have 308 units and is located at 3889 N. Steele Blvd. Golden & Associates of Birmingham Ala., is the builder. This large scale development was valued at $38.032 million. The units are designed for the high-end multifamily community and working professionals, according the builder’s website. The units will incorporate some retail space on the ground floor. There will be seven buildings in this project encompassing 340,000 square feet.

Thompson Thrift Construction out of Terre Haute, Ind., secured permits to build 118 units in the same vicinity at 255 Van Ashe Dr., which were valued $41.288 million. Their subsidiary development firm – Watermark Residential – acquired the 17.7 acres at the northeast corner of Steele Boulevard and Van Ashe Drive for $4.3 million in early January. This project dubbed “Watermark at Steele Boulevard” is slated to have 306 units when all phases are completed.

This area of north Fayetteville became ripe for development since the city rezoned nearly 200 acres in December for commercial (which includes apartments), large scale use. The city recently completed the $4.6 million Van Ashe Drive extension that connects Arkansas 112 to the Northwest Arkansas Mall area. City officials anticipate more development will occur in the area, filling in land between Interstate 49 and the Northwest Arkansas Mall.

Fayetteville’s overall commercial/apartment sector permit values totaled $80.761 million in January, all of which were new building. One year ago the city’s commercial permits totaled $2.401 million. Springdale did not issue any new commercial construction permits in January.

In Rogers. the city issued two large scale permits for office and retail space in the Pinnacle Hills area. A permit valued at $7.5 million was issued for another office building to be located at 4204 S. Pinnacle Hills Parkway. Then across I-49 another permit valued at $3.045 million was issued for The District (Retail) center at the 4200 block of J.B. Hunt Drive. Rogers total commercial permits were valued at $10.54 million, up 18.82% from the $8.87 million reported in the same month last year.

In Bentonville there were three new commercial permits issued totaling $5.55 million for the construction of a large banquet hall at 2202 S.W. I St., a new office building at 1907 E. Central Ave., and an industrial warehouse located at 3201 S.W. I St. A year ago the city’s commercial permits were valued at $7.316 million.

The apartment complex projects were the catalyst for the bulk of the region’s commercial activity in January and economists expect that to continue as occupancy rates rose to 98% at the end of 2015. CBRE analyst Brian Donahue of Fayetteville recently said even with the potential for more than 1,900 units (6% of existing supply) to come online over the next two years he does not expect occupancies to drop below 95% because of the pent up demand and population growth in Northwest Arkansas. He said the absence of new market rate apartment construction during the last few years has boosted Northwest Arkansas’ apartment occupancy to an all-time high. The shortage of available units has allowed property owners to increase rents 8.6% over the last three years – 3.3% in 2013, 1.5% in 2014 and 3.8% in 2015.

“As new units come online we expect rental rate increases to decline to around 2% with increased occupancy causing rent specials to become more prominent,” Donahue said.

GROWING RESIDENTIAL
New residential construction for single family dwellings also enjoyed a more robust pace in January. The four cities issued permits for 129 new homes valued at $32.23 million, up compared to 87 new homes valued at $21.72 million in January of 2015.

Bentonville led the growth in residential issuing 44 permits in January with a combined value of $13.19 million, against 36 new home permits valued at $10.337 million in the year-ago period.

Fayetteville had 31 new home permits issued in January valued at $7.42 million. This was a vast improvement over the 10 new home projects in the year-ago period which had a cumulative value of $2.4 million.

In Springdale builders requested permits for 20 new homes in January, with valued construction costs of $5.366 million. This local building segment rose 44% from the 13 homes valued at $3.722 million in January of last year.

Rogers also issued more home permits year-over-year. In January the city issued permits to start 34 new homes with combined construction costs of $6.249 million. This compared to 28 new homes valued at $5.245 million in the year-ago period.

Brent Hanby, co-owner of Encore Flooring and Building Products in Springdale, is not surprised by the growth he continues to see in the local residential construction sector. Hanby’s business caters to homebuilders and he said the local housing market is again hitting on all cylinders. He credits the gains with low mortgage rates and the absorption of finished but unoccupied homes for sale in the region the last five years. Hanby said with the growing population and full employment status in the region vacancy rates for multifamily are down to 3% or lower in most cases and the transplants moving into the area each month have to live somewhere.

“I’m hearing that all four of the larger Chambers of Commerce are getting tons of calls/inquiries from all sorts of industries about moving to Northwest Arkansas. I know for a fact this is true for the Springdale chamber,” said Hanby, who serves as board treasurer for the Springdale Chamber of Commerce.

NATIONAL SCENE
Northwest Arkansas largely mirrored the national building scene in January. Ken Simonson, chief economist for Associated General Contractors of America, said Tuesday (March 1) there were solid gains for month and year in apartment, nonresidential and highway construction, helped along by mostly favorable weather. Construction spending across the U.S. in January totaled $1.141 trillion at a seasonally adjusted annual rate, which was 1.5% higher than the upwardly revised December total and 10.4% higher than in January 2015, Simonson said.

Private residential spending increased 7.7% compared to January 2015. Spending on multifamily residential construction jumped 30% year-over-year, while single-family spending rose 6.6% compared to January 2015.