NWA construction sector keeps steady pace, permits up 48.5% in October

Commercial and residential builders across Northwest Arkansas are wrapping up a solid year of work as the region’s four largest cities issued cumulative new construction permits valued at $86.484 million in October, a 48.5% gain from a year ago.

Residential permits were flat against October last year, but more commercial projects continue to take shape in the two-county area thanks to office buildings, retail, restaurants and apartment complexes.

The 9-story office building in western Rogers, a project by Hunt Ventures, was the largest of the new commercial permits issued last month at nearly $30 million. Also underway nearby is Pei Wei Asian restaurant at 4895 W. Pauline Whitaker Parkway in Rogers. That permit was valued at $386,580. An industrial warehouse at 1700 W. 13th St., in Rogers had a value of $600,000.

In Fayetteville, the Whole Foods building permit was issued at a value of $2.55 million. The city also issued a permit for 100 new apartment units for a value of $17.933 million.

Springdale did not issue any new commercial construction permits in October. Bentonville issued four commercial permits valued at $3.831 million last month. Two of those were office space/retail centers, one 10-unit apartment complex and work on the Frank Lloyd Wright home at Crystal Bridges.

CONSTRUCTION JOBS
Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas, said the commercial sector has picked up steam after lagging behind the residential market following the recession and lengthly recovery. She expects to see commercial construction continue in the region as the population grows and the overall job numbers remain strong. Deck has said this recovery is part of a bigger macro-economic improvement in this sector.

Construction firms added jobs in 37 states and the District of Columbia between October 2013 and October 2014 while construction employment increased in 28 states and the District of Columbia between September and October, according to Labor Department data and info from the Associated General Contractors of America.

"These year-over-year and one-month changes in the nation’s job growth show that construction is doing well in most of the country," said Ken Simonson, the association's chief economist.

Arkansas was one of four states that reported unchanged construction jobs last month.
Northwest Arkansas continues to add construction jobs, and employed 700 more in October, compared to the year-ago period, according to the Bureau of Labor Statistics.

MULTIFAMILY SECTOR
There were also 110 new apartments approved and permitted by the cities of Fayetteville and Bentonville in October. The multifamily sector, particularly in Fayetteville, is beginning to see higher vacancy rates because of the constant building.

Recent construction of rent-by-the-bed style student apartment complexes around the University of Arkansas in Fayetteville helped push the vacancy rates for multifamily real estate in Northwest Arkansas up to 6.5% in the first half of 2014 from the 4% reported in the first half of 2013 and the 5.8% reported in the second half of 2013, according the Arvest Skyline Report released in September.

With 16,194 rental units in 340 apartment complexes within Northwest Arkansas’ total of 31,802 units in 713 complexes, Fayetteville’s multifamily real estate market has the highest vacancy rate in Benton and Washington counties at 7.2% for the first half of 2014. That figure is up from the 5.6% reported in the first half of 2013 but down from the 7.7% reported in the second half of 2013.

"The new purpose-built student multifamily housing in Fayetteville made local vacancy rates higher, but the rest of the market continues to be quite tight in Northwest Arkansas," said Deck. “There are still opportunities for new complexes in both Benton and Washington counties and we expect to see continuing announcements of additional units in the coming months."

The average monthly lease price for a multifamily property unit in Northwest Arkansas increased to $568.80 in the first half of 2014 from $556.71 reported in the second half of 2013. The average monthly lease rate per square foot was 67 cents, up just one cent from December 2013. The by-the-bed rental units were by far the most expensive to lease at $1.36 per square foot, followed by studio at $1.23, 1-bedroom at 78 cents, 4-bedroom at 71 cents, 3-bedroom at 63 cents and 2-bedroom at 62 cents, the report notes.

SUSTAINABLE SINGLE FAMILY
It’s been a good year for home builders across the region as the market appears to have reached a sustainable pace with 122 new residential permits issued in October among the region’s four largest cities. The values of residential permits issued by Fayetteville, Springdale, Rogers and Bentonville totaled $29.985 million which was flat against the $29.789 million permit value reported a year ago.

Springdale grew its residential permits from 18 to 25 last month. The permits totaled $6.429 million, up from $5.437 million in the year-ago period. Fayetteville also issued more permits for single family and duplexes last month. The total 49 permits were valued at $9.83 million, compared to $7.06 million in October 2013.

Construction slowed in Benton County as Rogers issued 19 permits valued at $3.846 million, down 17% from a year ago. Bentonville issued 29 new residential permits valued at $9.87 million, down 12% year-over-year.