Condo Market in Fayetteville Gridlocked As Projects Nixed

About 18 months ago, the condo market in central Fayetteville was galloping ahead at full speed. Several projects were coming out of the ground and new ones were announced on what seemed like a weekly basis.

Since then, local market conditions and the economic slowdown have led some would-be condo developers to pull back the reins.

Other high-profile projects in the downtown and Dickson Street areas are either in a state of limbo, like the Renaissance project, or have met with different fates such as foreclosures or legal complications, like the Legacy building.

As of mid-March, there are about 60 empty upscale condos in downtown Fayetteville. That number will nearly double when the 54 units at the Lofts at Underwood Plaza become available for pre-sale May 10.

Two of the factors developers blamed for the current situation were escalating construction costs and more restrictive lending criteria.

Another is that prices range from $226 per SF on the low end to $357 per SF and higher on the upper end. This means there are a finite number of potential buyers for upscale condos in Fayetteville.

On a recent sunny afternoon at the corner of West Avenue and Prairie Street, traffic was brisk.

Over the span of a minute, a dozen or so cars and trucks drove past two empty lots that were once home to the American Milling Co. The site was supposed to be filled with 30,000 SF of condo, office and retail space by now.

“The timing of the whole deal is what threw us off,” said Burt Box, president of Milver Investments in Fayetteville.

In March 2007, Box announced the Mill at West End, a $7 million mixed-use condo project.

“Initially, we wanted to sell for $160 to $180 a SF,” said Ben Lester, principal broker for the Milver Agency, the real estate arm of Milver Investments.

After getting bids back from construction companies, “we would have had to sell them for $250 a SF,” Lester said.

Box decided not to go forward with his project, and is selling the land.

Many lenders want a high percent of pre-sold units what before they’ll provide money for a condo project, said Collins Haynes, a real estate developer and principal with Haynes & Associates Ltd. in Rogers.

“The lending market right now is beyond conservative,” Haynes said.

Haynes was part of a group that had planned a $7 million, six-story mixed-use building on Dickson Street at the former Mr. Tux location.

Those plans changed, however. The group decided the risk/reward ratio on building condos is too high, and is going to hold on to the site for other developments, including a spa.

Across the street from Haynes’ property are the Lofts at Underwood Plaza. Bill and Craig Underwood, John Nock, Rob Merry-Ship, Ted and Leslie Belden are developing the $22.5 million project.

One project that has sold most of its units is Locust Street Townhomes. Four of the six 1,100-SF, $329,000 units have sold.

Many of the condo developers were looking to market the units not only to residents of Northwest Arkansas, but also to other people from around the state and region who wanted to be close to the action of Dickson Street and the University of Arkansas, said Tom Reed, owner of Real Estate Market Data and partner in Streetsmart Data Services Inc. of Fayetteville.

Outside of the local market, though, there are only so many people who would want to buy in this area, Reed said.

Once the real estate market corrects itself, many of the condo projects in Fayetteville will probably be successful, he said.

Haynes also believes many of the other condo projects under way now have a good chance of doing well.

“I just sleep better at night knowing I don’t have a condo project right now,” he said.