Bob the Builder has to be some kind of tired. Top to bottom the Northwest Arkansas construction pace has pushed new residential and commercial permit values from January through June to triple digit gains over a year ago.
Fayetteville, Springdale, Rogers and Bentonville cumulatively issued new construction permits valued at $605.763 million in the first six months of 2016, up 103% compared to the $297.657 million in permits during the same period of 2015.
While the single family residential pace had a healthy pulse in the first half of this year, the commercial building sector – which includes large scale multifamily housing – was up a whopping 226% over the same six months of 2015. The four cities issued new commercial permits valued at $390.85 million in the first six months of the year, well ahead of the $119.764 million reported a year ago.
There are several active multifamily projects in Bentonville, Rogers and Fayetteville with a combined permit value of nearly $100 million this year or roughly 25% of the total commercial permits issued through June. Excluding multifamily some of the largest commercial projects to get permits issued this year include:
• $66.5 million, Arkansas Children’s Hospital – Springdale;
• $12.375 million, Primrose School in Rogers;
• $10.7 million, office complex for Washington Regional Hospital – Fayetteville;
• $7.651 million, Tyson Foods office on Emma Avenue Springdale;
• $7.5 million, office complex in the Pinnacle Hills area of Rogers;
• $6.9 million, Marshalltown Tool expansion, Fayetteville; and
• $6.872 million – Tyson Foods new Incubation Center – Springdale.
Each of the four largest cities in the region have a healthy share of large projects underway through June. In Springdale construction on the new Arkansas Children’s Hospital and two large projects from Tyson Foods have helped to push commercial permit values up 615% in the first half of 2016 compared to the year-ago period. The city’s commercial permits issued through June totaled $94.575 million, compared to $13.226 million a year ago.
Fayetteville is also a construction hot spot with new commercial permits worth an estimated $155.178 million through June. Permit values are up 434% from the $29.059 million reported a year ago. Multifamily is a big reason why the city’s permits have increased four fold. Multifamily projects in the city have permits values of more than $85 million through June.
In Bentonville commercial building has also been active. The city’s new commercial permits total $78.562 million through June, up 104% from the $38.463 million a year ago. Two new schools in Bentonville valued at $31 million are the two biggest permits issued by the city through June.
There is never a shortage of commercial building in Rogers, with plenty of activity through June pushing the year-over-year permit values up 60.27%. The city has issued commercial permits valued at $62.54 million through June, compared to $39.016 million a year ago.
Through the first six months of 2016 builders obtained 902 permits to construction new homes in the region’s four largest cities, 7.5% more units than they built in the same period last year. Permit values on the new 902 homes totaled $214.91 million, up 20.8% from a year ago.
New home prices are up year-over-year as land prices are up as much as 50% from the same period last year according to builders polled by Talk Business & Politics. Higher land prices are a direct result of limited ready lot supplies in parts of Bentonville, Fayetteville, Springdale and Rogers. Over the past several years many builders were able to secure lots in unfinished subdivisions that were platted before the housing bust in 2007 and recession of 2008. Those bank-owned lots have been built out and home builders are now back to turning red dirt and doing their own development for home lots.
The demand for new homes continues to be steady, according to local homebuilders like Mark Marquess of Riverwood Homes who is actively building in Fayetteville. Marquess said he’s built and sold more than 350 homes in the past couple of years finishing out two or three subdivisions that were begun before the housing market collapsed in 2008. Now he’s turning to his own new development as lot prices have risen dramatically.
He said the only way builders can keep building entry level homes is to do their own development. He said with the smaller square-footage of the starter homes, the math will not work when factoring in the higher land cost.
Rausch Coleman Homes of Fayetteville has been building larger footprint homes in its newest developments in Rogers and Fayetteville.
Subcontractors from electricians to painters and plumbers for area homebuilders have told Talk Business & Politics in recent months that business is good and while the largest cities are seeing a lot construction, outlying areas like Pea Ridge and Prairie Grove are also heating up with new housing developments.
Residential Permits (January – June)
2016: 246 homes valued at $74.005 million
2015: 274 homes valued at $64.402
2016: 212 homes valued at $49.502 million
2015: 207 homes valued at $43.657 million
2016: 267 homes valued at $48.242 million
2015: 195 homes valued at $31.897 million
2016: 177 homes valued at $43.159 million
2015: 163 homes valued at $37.937 million
Kathy Deck, director of the Center for Business & Economic Research at the University of Arkansas, said the region’s new residential construction pace, although active, is not building up a surplus inventory and appears to be sustainable given the population growth and stronger local economy.
The four cities in this report had a mixed report in June with residential permit values tapering to $34.275 million, down 3.29% from a year ago. Fayetteville and Springdale saw a reduction in single family home permits issued in June, while Bentonville was basically flat with a year ago and Rogers saw twice as many residential permits from the same month last year.
Commercial construction across the region was strong in June with the four cities issuing permits worth $42.178 million, up 119% from the $19.221 million reported a year ago. Multifamily in Fayetteville accounted for $8.325 million of that city’s commercial permit values in June.
The real estate growth so far this year in the local region follows an upward trend across the nation according to a report by the industry trade group. Nationally construction spending decreased in June, marking the third month a row despite a strong overall first half, according to the Associated General Contractors of America. Ken Simonson, the association’s chief economist said nearly every major segment had first-half gains of more than 5% compared with a year ago.
“Contractors, surveys and the media all continue to report plenty of projects are starting or will soon. Construction spending in June totaled $1.134 trillion at a seasonally adjusted annual rate, 0.6% lower than the May total,” Simonson said.
He reports single family residential spending is up 11% this year over last. Multifamily construction spending is up 22% year-over-year. Private commercial construction is up 7.9% through June, according to the trade group.
NEW CONSTRUCTION PERMITS (January through June)
2016: $152.567 million
2015: $102.865 million
2016: $204.68 million
2015: $72.716 million
2016: $110.782 million
2015: $70.913 million
2016: $137.734 million
2015: $51.163 million