It’s costing renters in Benton and Washington counties about 7.1% more year-over-year for the apartments they rent, according to the recent Apartment Market Survey completed by Brian Donahue of CBRE for the Fayetteville metro area.
However, the growing Northwest Arkansas population and healthy local economy continue to favor investments in multifamily properties. Investors managed to maintain a 97.5% occupancy rate through the first half of 2016 across the region despite that in the past five and half years there have been 1,052 units added to the market and 1,912 are still under construction through 2017, the CBRE survey indicates.
Compared to one year ago, Donahue found the average rental rate in Northwest Arkansas rose $43 per month to $651. The rate increases vary between cities and in regards to apartment size but overall it was the larger three-bedroom units that saw the biggest jump in rents over the past 12 months. CBRE found the average three-bedroom unit rent rose $115 per month to $995 as of June 30. One bedroom units averaged $49 more in monthly rent to $556, the exact same price as two bedroom units which saw rents increase $18 per months from a year ago.
Donahue said rental specials and concessions are virtually nonexistent in the tight rental market. Rent costs are the highest in Bentonville with a one-bedroom unit costing an average of $661 per month for 650 square feet of space, which is a $1.02 per square foot. In Springdale the rent is $498 per month for a similar size unit. Rents in Rogers are also higher than in Fayetteville, according to the recent survey. The one bedroom unit in Fayetteville has an average rent of $510, or 88 cents per square foot. In Rogers the same size unit costs $636 per month, or 94 cent per square foot.
HOUSING AFFORDABILITY CONCERN
Randy Eno recently moved to Northwest Arkansas from Austin, Texas. He looked for apartments in Bentonville, but eventually settled on an older unit in Rogers because to rent a one bedroom unit in Bentonville the cost to move in was roughly $1,100, with rent being about half of that amount. He told Talk Business & Politics he was surprised by the rents in the area were almost as much as he paid in the larger Austin area.
Rising area housing costs are of concern to economist Mike Harvey, chief operating officer for the Northwest Arkansas Council. He said as home prices rise, so do rental costs and vice versa. Harvey said rising real estate prices are a double-edged sword, they are great for homeowners, but lousy for renters and if home prices continue to rise they can create barriers the prevent renters from purchasing a home.
He said the active jobs market in the region could be stymied in the future if housing costs continue to escalate because people will not be able relocate to the region to take jobs if they can’t find affordable housing. While the local market increases are not yet to that level, Harvey said it’s something to watch.
Construction of multifamily projects continue. Donahue said there are eight known projects under construction through 2017. Those are: The Links at Fayetteville Phase II – 484 units; Uptown Apartments in Fayetteville – 308 units; Watermark at Steele Boulevard in Fayetteville – 306 units; Town Park @ Har Ber in Springdale – 157 units now open; Watermark on Walnut Creek in Rogers – 220 units; Palisades at Pleasant Grove in Rogers – 208 units; The Pointe at Bentonville Phase I – 170 units; and The Parc @ Bentonville – 216 units.
There are also four student housing properties in Fayetteville expected to open in the fall semester adding 652 units and 1,657 bedrooms.
The CBRE Survey also reviewed the number of sales of multifamily properties in the first half of 2016 finding there were only three transactions where complexes with more than 50 units changed hands. This was less than half of the seven sales transactions completed in the same six-month period of 2015.
Donahue found the average sale price of these three transactions was just over $63,500 per apartment unit. The sales were a 1990’s vintage trading just under $60,000 per unit, a 1980’s vintage for over $71,000 per unit and a 1970’s vintage traded for roughly $30,000 per unit, he said.
“Even with the slow start to the year we expect multifamily transactions to continue at an above average pace due to the low interest rate environment and continued strong investor demand,” he said. “Lending rates continue to be a driving force behind the number of apartment communities actively for sale across the country as sellers look to capitalize on historic pricing levels while investors can lock in long-term attractive fixed rate debt.”