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Kathy Deck: Northwest Arkansas Needs More Apartments

2 min read

Vacancy rates in the second half of 2015 rose in northwest Arkansas from previous record lows as new units were completed and entered the market, according to the Skyline Report on commercial and multifamily real estate.

Vacancies were still lower than they were at the same time in 2014. Vacancy rates for the region overall were 3 percent in the second half of 2015, down from the 3.7 percent reported in the same period of 2014 and up from the 2.3 percent reported in the first six months of 2015.

The reports are sponsored by Arvest Bank; the research is led by Kathy Deck, director of the Center for Business and Economic Research at Sam M. Walton College of Business at the University of Arkansas.

Springdale reported the lowest vacancy rate for multifamily real estate with 1 percent in the second half of 2015. Bentonville and Siloam Springs reported vacancy rates of 2 percent and 2.7 percent, respectively, while Fayetteville’s rate was 3.6 percent. Rogers reported the highest vacancy rate at 4.8 percent.

“Although the amount of construction in the multifamily sector is high, the extremely low vacancy rates seen throughout northwest Arkansas are sending strong signals to developers that there is demand for additional apartments,” Deck said in a news release. “The increase in average prices is partly due to two factors: that the new units are on the higher end of the scale and that the complexes are raising leases as they have tight vacancy rates.”

In Bentonville, more than 570 new rental units have been announced or are under construction. In Fayetteville, more than 4,400 new rental units have been announced.

Increased demand has had an influence on the cost of rental space. The average monthly lease price for a multifamily property unit in northwest Arkansas increased to $601.43 in the second half of 2015 from $581.72 in the first half of 2015.

Commercial construction will continue as $112.8 million of commercial building permits were issued between July 1 and Dec. 31. The overall vacancy rate for commercial real estate in northwest Arkansas was 12.4 percent, up from the 12 percent reported in the first half of 2015.

“The commercial real estate market is beginning to reflect the overall optimism we have been seeing in the economy in northwest Arkansas,” said Tammy Engle, senior vice president and loan manager with Arvest Bank in Siloam Springs. “At the same time, we are pleased to see that optimism tempered by careful consideration of the needs of the market. Everyone is letting the experience of the last 10 years wisely govern their decision-making processes.”

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