Rustin Chrisco has experienced a rollercoaster ride with residential real estate in downtown Bentonville. And he has advice for the future.
Properties in downtown Bentonville today are selling for almost $1 million, and Chrisco’s business has grown about 400%. Chrisco, 48, has seen downtown Bentonville go from a ghost town to one of the hottest residential real estate markets in Northwest Arkansas.
When he and his wife Pamela moved to a house on Main Street in downtown Bentonville in 1997, Chrisco immediately began buying property in the area. In 2000, he and business partner Jake Lambert, 43, formed Main Street Builders, and began to rehab, remodel and then rent old houses in downtown. Their plan at the time was to build their retirement through long-term rental income.
The recession hit in the mid-2000s, and the bottom fell out of the local economy. But Chrisco kept on buying.
“I lost sleep at night in 2006, 7 and 8, but I continued to buy,” Chrisco said. “I’d lie awake at night looking at the ceiling, and the next day I’d continue to buy property. Bargain property. Always bargain property.”
Although he took financial risks many others would not have, Chrisco said he was able to invest smartly because he lived frugally.
“I take those risks only once I’ve taken care of our living expenses and our lifestyle,” he said. “So that’s discretionary money that we use to take those risks. I never risk more than what we can afford to lose.”
During that time, Chrisco’s rental portfolio was taking a hit as people moved out of the area because of the recession. The demand for housing fell, rents went down across the area and Chrisco had to lower his.
“At one point, I remember laying awake at night because we were subsidizing every piece of property that we owned by $50 to $100 a month, above the rents we were charging,” Chrisco said.
But Chrisco continued to buy properties anyway.
“I’m telling you, it was like doubling down,” Chrisco said. “We doubled down even as it was looking bad.”
Chrisco bought because he had a feeling downtown was poised for a big change.
“I bought property in downtown Bentonville on the assumption that Bentonville couldn’t stay the way it was forever,” he said. “I felt like it was going to go and go big time at some point, and that’s what happened,” he said.
Several signs indicated that to Chrisco. First, there was a growing trend across the country of urban revitalization, not only in large cities, but also in small ones like Bentonville. Also, Bentonville had adopted its master plan in 2004, which provided a conceptual blueprint for city leaders and developers. Its aim was to revitalize downtown, attract new businesses and new residents and foster growth that was sustainable over the long term.
Chrisco credits the mayor and the city staff for having a vision that set the tone for a market-oriented approach and for setting big goals for the city’s growth. Also, in May 2005, Alice Walton announced her intention to build a world-class art museum in Bentonville. Crystal Bridges Museum of American Art opened in November 2011.
The influx of suppliers into the area to be closer to their main customer – Walmart Inc.-— was another driver. The suppliers moving in were well educated, came from all across the country and were used to having many amenities in the places in which they had lived. Chrisco believed they would demand the same things in downtown Bentonville.
“I’m not a soothsayer. I can’t see the future, but I can follow trends very well,” Chrisco said. “And the trend lines were shooting straight up for Bentonville.”
RISING SALES PRICES
Chrisco was right. Things began to turn around in 2009 and 2010, and downtown Bentonville came roaring back. By 2012, residential real estate in downtown Bentonville was booming and hasn’t stopped since.
An October 2017 study on the downtowns of Northwest Arkansas, compiled by the University of Arkansas’ Center for Business and Economic Research and commissioned by the Walton Family Foundation, found residential valuation in downtown Bentonville increased 145.1% between 2012 and 2017. In the same period, the average sales price per residential square foot increased 207.5% from $62.57 to $192.42, by far the fastest rate increase in any of the surveyed downtowns.
Chrisco and Lambert are reaping the benefits. Lambert said he and Chrisco purchased a house and property on Southwest E Street for his family for $55,000 in 2005. He and his family lived there for 12 years, and he has recently built a new house on the property. Lambert said the value of the property alone has risen to $250,000.
“There’s a house two doors down from me that we paid $28,000 for in 2013, and we remodeled it, added to it and sold it. And the owners just put it under contract for $475,000,” Lambert said.
Lambert said they do have regrets about properties they passed on over the years.
“I remember specifically one house on Northeast Second Street that [Chrisco] and I looked at about four years ago,” Lambert recalled. “Little old house, nice piece of property and it was $95,000. We tried to get it for $90, maybe $85. My gosh, now I’d run over there naked in the pouring rain to pay $95.”
In the past few years, Main Street Builders has begun to strategically sell off some of its rentals. Houses they bought for $50,000 or $60,000 are now selling for $250,000 to $300,000, Lambert said. Those profits have allowed Main Street Builders to grow and reduce debt. They’ve also allowed the partners to get into bigger things, including commercial projects like the renovation of the old Ice House on Southeast Fifth Street.
Chrisco believes property costs in downtown are not going down any time soon. He said they are sustainable for the long term because of the market, the amenities available in the area and the fact Walmart and other companies continue to draw people to the area. He doesn’t believe Bentonville is in a bubble, or there will be a correction in residential prices.
“I don’t see that happening. I don’t, because supply and demand will dictate the prices.” Chrisco explained. “People are continuing to come in. There are initiatives by the Walton family to increase the desirability of the area through the money they’re spending on the trails and on things like the Skylight Theater and the Thaden School…. the restaurants people can walk to, the retail opportunities that have come in.”
“I talk to people who move here from places like Milwaukee or Charleston or New York or San Bernadino or Seattle, and our prices are still lower in residential housing than their prices are,” Chrisco said. “Sometimes considerably lower, so they still see this as a value.”
THREAT OF GENTRIFICATION
With skyrocketing costs in downtown residential real estate, Chrisco, who’s on the city’s board of adjustments, sees challenges coming. One of those is gentrification, the process of renovation of deteriorated urban neighborhoods by an influx of affluent residents, he said. While there are many benefits from it, gentrification can result in long-time residents being forced out of an area because of the increase in housing costs. Many times with gentrification comes a lack of affordable housing.
The Walton Foundation study concluded there is a shortage of affordable housing in Bentonville, and in all the downtowns across Northwest Arkansas.
“Affordable housing really means workforce housing,” said Troy Galloway, community and economic development director for the city of Bentonville.
Galloway said that means people are able to live in close proximity to where they work and shop and where their kids go to school, if they so choose, instead of having to live in another town or outside the city because that’s all they can afford.
“It’s kind of defeating the point if you’ve got a job in downtown Bentonville, but you can’t afford to live there. So you’re going to have to live in southern Missouri or out in the western part of Centerton,” Galloway explained. “Some people choose to do that, and that’s fine. But for the ones that would prefer to live in Bentonville, we want to do what we can to make sure there are options for them.
“At the end of the day, affordable housing helps solve a lot of problems, it solves a lot of the traffic challenges that we have here in Northwest Arkansas,” Galloway added. “It creates more walkable communities, and it gives us a built-in market for the goods and services that we hope continue to be provided in our downtown.”
Chrisco pointed out one of the traffic challenges is a lack of parking, as workers who can’t afford to live in downtown have to drive in and park their cars for the day. Driverless cars and public transit are the answers to those issues, he believes.
“In the future, driverless cars may bring people into town and drop them off, and then those cars, if they’re self-driving, can maybe go park on the outskirts of town in a parking lot,” he said. “Then when the owner is ready to leave town, they summon the car, and the car comes to pick them up. And that’s probably not fiction. That’s probably coming in the next 15 to 20 years.”
Galloway said the city is doing its part to encourage affordable downtown housing by making sure there are policies and regulatory changes in place to allow densities and innovation. That way the demand can be met through the free market in many forms of housing, including smaller single-family homes, townhouses, apartments, mixed-use buildings that have residential components and urban apartment developments.
“[Affordable housing] is going to come in a lot of different shapes and sizes and variations,” Galloway said. “Otherwise I think we’re missing the point, because I don’t think there’s such a thing as one size fits all when it comes to people’s housing choices. And if we restrict ourselves in that regard, then we’re going to miss an opportunity.”
However, providing affordable housing in downtown Bentonville may be difficult, both for developers and for the city. Galloway said the city can work to reduce costs for developers, but at the end of the day, developers have to choose to build affordable housing. That is difficult in Bentonville, where property is so expensive.
“Dollars are made up in square footage, so you almost can’t pay $200,000 to $300,000 for a lot and put an affordable 1,000-square-foot house on it because the cost per square foot is just so much,” Lambert said. “I’m not sure that’s even a possibility, unless there’s some big investor who is willing to donate property or to somehow lead the charge on that — because private individuals can’t afford to do something like that.”
But what Main Street Builders has done is to remodel and renovate small houses, not tear them down in order to build larger ones.
“For the most part we take houses that already exist, regardless of their size and renovate appropriately, rather than try to milk every dime we can off a piece of property,” Lambert said. “That has been our M.O. of doing business for a long time.”
Chrisco said private developers and the city have to do what they can to make affordable housing happen in the downtowns across Northwest Arkansas.
“For example in Siloam Springs, we have this historic old building that’s about 7,000 square feet that was an old gristmill, and we’ve made the decision that it is affordable for us to go in and put student housing in that building; and that’s more beneficial than putting office space in that building,” Chrisco said. “So, I think if developers can simply look at projects from the standpoint of having something that’s so unique and can meet their goals as well as satisfy the local population goals, then everybody comes out in the end.”
“The problem is always that if a developer can get more money by putting individual houses on a property, they’re going to do that, so what we have to do at a city level is make sure our zoning regulations, as well as fire regulations, encourage rather than discourage affordable housing,” Chrisco said. “And, we have to go to higher density in all the housing that we do, to the extent that we can.”
Chrisco believes because there is a shared vision between developers and city leaders, they will work together to find ways to supply affordable housing.
Meanwhile, the real estate boom that has happened in downtown Bentonville is also translating to other Northwest Arkansas downtowns.
The Walton Foundation study found Fayetteville had the fastest growth rate of downtown resident population at 2.9%, with the average price per residential square foot increasing 12.9% from $218.42 in 2012 to $246.67 in 2017. The average price per residential square foot rose 104.5% in Rogers from $40.48 in 2012 to $82.78 in 2017. In Siloam Springs, residential data for average sales price per square foot was only available for two years, but in 2013, the average sales price per square foot was $46.03. And in 2016 it was $60.51. Downtown Springdale also saw an increase of 47.5% in average residential square foot price, from $43.65 in 2012 to $63.62 in 2017.
“I think you’re going to see what has happened to some degree in downtown Bentonville in these other towns also,” Lambert said.
Chrisco also sees other wealthy families across Northwest Arkansas investing in area cities, the way the Waltons have invested in Bentonville and beyond.
“The Simmons family in Siloam Springs, Mrs. Jones and the Jones family in Springdale, and the Walkers…. There are just a lot of benefactors in the area, philanthropists that are generous with their money,” he said.
Because of these developments and the high costs of doing business in Bentonville, Main Street Builders is moving on to some of the region’s other downtowns. In Rogers, the company has purchased property overlooking the Railyard Bike Park, with plans to put multi-density and mixed use housing on it. In downtown Siloam Springs, the Ziggywurst Restaurant is completed, and a warehouse renovation into student housing to serve the John Brown University population is coming soon.
Chrisco counts himself as fortunate to be in a place like Bentonville, where city leaders have a vision and developers work together to benefit the downtown area.
“It really is a shared vision that people have. I think everybody knows downtown Bentonville is a wonderful place to live and we’re all very fortunate to be here at this time,” Chrisco said. “If we can all work together and not only do well in business, but also if we build a heritage in Bentonville and build a community that becomes a model down the road, then we’ve accomplished more than simply making money.”