NWA real estate market remains healthy; Skyline Report turns 20

The Northwest Arkansas real estate market experienced strong home sales and low vacancy rates in multifamily and commercial properties in the first half of 2024, according to Arvest Bank’s new Skyline Reports.

On Thursday (Sept. 12), Fayetteville-chartered Arvest Bank released the Skyline Reports on commercial, multifamily and residential real estate in Northwest Arkansas for the first half of 2024. The Center for Business and Economic Research (CBER) at the Sam M. Walton College of Business at the University of Arkansas completes the reports semiannually.

Also Thursday, more than 400 area business leaders attended a Springdale event to celebrate the 20th anniversary of the Skyline Report. The event included economic and panel discussions with area leaders, including real estate developers, city planners and bankers.

In 2004, Arvest Bank contracted with CBER to collect information about the area real estate market. CBER researchers aggregated and analyzed data from area governments, property managers, visual inspections, and the business media to provide reports on the status of property markets in Benton and Washington counties. Since the first Skyline Report was released in the third quarter of 2004, more than 12,000 pages of real estate data and analysis have been generated, and 152 reports have been completed.

RESIDENTIAL NUMBERS
According to the new report on residential real estate, 4,799 homes were sold in the first half of this year, up 8.5% from the 4,422 homes sold in the same period last year. Of the homes sold, 1,896 were new construction, a record high for the Skyline Report. And 39.5% of the homes sold were new construction, the second-highest percentage for the Skyline Report after the 39.9% in the second half of 2023 at an average price of $399,344. The overall absorption rate of 2,497 homes reached a 20-year high, up 29.6% from the first half of 2023.

The average price of homes sold continued to rise in Benton County. The price rose by 2.5% to $432,956 in the first half of this year from $422,564 in the same period last year. In Washington County, the average price fell by 0.7% to $389,574 from $392,306.

The number of home building permits issued rose to 2,631 in the first half of 2024, the third-highest total since the 2,892 permits issued in the first half of 2022. The average permit value was $326,426 in the first half of 2024. In the second half of last year, 2,534 building permits were issued at an average value of $305,283.

In the multifamily market, the vacancy rate increased to 3.3% from 2.2% last year “but remains at a very healthy level despite a significant number of new apartment complexes and units entering the market,” the report shows. Since the first half of last year, “27 new apartment complexes with 3,986 new units have opened, which has driven the slight increase in vacancy rates.” Average apartment rent increased by 9% to $1,037.57 monthly from $952.17 in the first half of 2023. Rent is up 48.9% from five years ago.

Building permits were issued for 12 apartment complexes in the first half of 2024 and were valued at $362.55 million, up 41% from $256.4 million in the second half of 2023. The apartment complex with the highest permit value was Clear Creek Apartments in Springdale, with a value of $51.17 million.

HOUSING AFFORDABILITY
“The overall housing market in Northwest Arkansas for both homes and apartments continues to be robust with a high percentage of newly constructed homes and multifamily units being built and absorbed,” said CBER Director Mervin Jebaraj. “However, affordability of housing remains a major concern. Over the past five years, home prices have increased 72.5% in Benton County and 65.4% in Washington County, while average apartment lease rates increased 48.9%. We are concerned that these rates of housing inflation will have to moderate for continued and sustainable growth.”

Jebaraj has been focused on the need for regional coordination regarding rezoning along the U.S. Highway 71B corridor and cited recent changes made by Rogers.

“I want to applaud the city of Rogers for being the first in the state to take bold action to rezone the entire city to match the long-range vision for the city that citizens created,” Jebaraj said “Instead of taking a piece-meal approach that other cities have used, their comprehensive approach simplifies the zoning code to just 14 types and will allow all development, including affordable housing, to be built quickly. The 71B/Walnut Street corridor now allows for mixed-use developments at various densities, and surrounding areas will have a cohesive but gentle step down in density as they transition to residential zones. This will create a true transit-ready corridor in Northwest Arkansas. The new code also allows for the construction of desperately needed missing-middle housing – such as single-family homes with accessory dwelling units, duplexes, triplexes and other, smaller multifamily housing options across the city. If this approach is replicated throughout the region, we believe that could make a significant and positive impact on housing affordability moving forward.”

COMMERCIAL SPACE

The Skyline Report on commercial real estate shows a “very healthy market.” The overall vacancy rate for all types of commercial space remained flat at 6.4% from the past two reports, as 538,455 square feet of new leasable space entered the market in the first half of 2024.

Amid rising vacancy rates in the nationwide office market, the vacancy rate in Northwest Arkansas fell to 7.4% in the first half of 2024 from 8.8% in the second half of 2023. Leasing activity was strong in the class A submarket, as 61,325 square feet of new space was added.

In the retail submarket, the vacancy rate also declined, falling from 7.9% in the second half of 2023 to 6.2% in the first half of 2024, as 61,098 square feet of new space was added. There was strong leasing activity in the class B retail submarket.

Over the same period, the vacancy rate for the warehouse submarket rose from 3.6% to 8% as 313,356 square feet of new space entered the market and two large existing spaces became available. Still, after visiting with area developers, CBER staff said there’s rising demand for additional warehouse space in the region.

Excluding building permits issued for Walmart’s new home office, the total value of commercial building permits rose to $406.1 million, a record high for the Skyline Report. In the second half of 2023, the permit value was $287.6 million. Only $700,000 of the total value was Walmart-related in the first half of this year.

“Looking back at 20 years of commercial real estate data in Northwest Arkansas is very interesting when you consider that the amount of leasable space has grown from just under 10 million square feet to more than 52 million,” Jebaraj said. “And to be able to say that the commercial market is very healthy in the first half of 2024 is a testament to the area’s growth and intelligent development. I can say with some certainty that the Skyline Report and Arvest Bank’s long-term commitment to support this important research has contributed greatly to the balanced growth we have all experienced.”

Kelly Carlson, executive vice president and loan manager with Arvest Bank of Benton County, reflected on the significance of the 20-year partnership with CBER to create the Skyline Reports and that they’ve provided area leaders with “the highest quality real estate data available.”

“This specific report highlights what Skyline is designed to accomplish as we see a healthy balance in commercial real estate and have the opportunity for a well-informed admonition from Mervin to the region about the need to address housing affordability,” Carlson said.

Following are the links for the new Skyline Reports: Link here for the residential report. Link here for the multifamily report. Link here for the commercial report.