Zoning changes are opportunities, not obstacles

When you hear “zoning changes,” you might think “obstacles.” But recent zoning changes in Northwest Arkansas, as well as some that are proposed as part of our cities’ long-term growth plans, should mean opportunity for developers and lenders.

At this fall’s 20th anniversary celebration of the Arvest Skyline Report, a panel of city planners from across Northwest Arkansas shared how their municipalities are managing continued growth across the commercial and multifamily and single-family housing sectors. While the solutions vary slightly to suit each city’s specific situation, the discussion among the municipalities demonstrated a shared commitment to creating solutions to overcome our challenges and grow the right way with smart design and land use.

It is evident from the recent Skyline data that Northwest Arkansas is an anomaly among metropolitan areas. The demand for homes is still strong. Home prices are still increasing. Despite new additions coming online, multifamily housing vacancy rates are still low, and we continue to see stable vacancy rates and even new requests in commercial markets, a segment that some in other areas have concerns about right now.

It’s safe to say that Northwest Arkansas ceased to be a best-kept secret some time ago, which reflects the attractiveness of our area and strength of our economy. But with new people moving here each day, you’re going to see continued strain on infrastructure, traffic and transportation systems. Our cities are addressing these challenges through their long-term growth plans, such as the Rogers Comprehensive Plan, Fayetteville’s 71B Corridor Plan and Plan Bentonville. These plans include new types of sustainable development, such as walkable neighborhoods, that help reduce traffic and ease some strain on infrastructure.

Adding more housing density closer to city amenities is great, but it must be financially attainable. Home prices continue to rise steadily, so adding more affordable options is a core issue every community in our area is trying to address. Projects that combine commercial components with larger multifamily housing options, as well as other types of development beyond traditional single-family neighborhoods, will help.

Recent and future zoning changes and growth plans will hopefully give developers an opportunity to tackle interesting projects, such as repurposing historic buildings into mixed-used spaces with office or retail on the lower levels and multifamily housing on the upper levels. But the creativity of these projects can add complexity to the underwriting process for developers and lenders. Lenders need to know the project will support itself, especially with rising labor, land and material costs. We also want to make sure developers understand there are different timelines for leasing commercial and multifamily spaces in a mixed-use project.

Beyond demonstrating their expertise and market knowledge, developers should speak with city planning staff early so they understand what can and can’t be done. Permit processes can be long, so starting early will help set expectations and timelines.

These conversations can ensure that a project’s long-term vision aligns with the city’s goals for long-term growth and preserves its sense of community. It’s essential the project addresses local needs and doesn’t exacerbate drainage, parking, traffic or other infrastructure issues that could jeopardize public support. Otherwise, it could be challenging to gain the necessary approvals.

The recent zoning changes in Northwest Arkansas and the likelihood of more to come mean that both banks and developers need to be flexible. The ability to collaborate on different types of projects will allow developers and lenders to address the challenges that naturally arise from the amount of growth we have experienced.

If we continue to invest in data like the Arvest Skyline Report and bring municipalities together as we did at Skyline’s 20th anniversary, there’s no end to what we will accomplish over the next two decades in Northwest Arkansas.

Editor’s note: Matt King is senior vice president and a commercial banker for Arvest Bank in Benton County. The opinions expressed are those of the author.