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Apartments in Northwest Arkansas Still in High Demand

5 min read

It’s a good time to be a landlord, but that doesn’t mean Lindy Lindsey is any less nervous about filling units.

Lindsey is the president of Lindsey Management, the apartment management subsidiary of The Lindsey Co. of Fayetteville, which oversees approximately 40,000 units in complexes across eight states. Lindsey said 9,000 of those units are in northwest Arkansas, and the company has plans to add to that number in the coming year, which would seem the smart play based on recent occupancy statistics for the region.

A recent apartment market study by Brian Donahue of CBRE, a commercial real estate company with a Fayetteville office, reported that occupancy rates for northwest Arkansas were 98 percent or higher in each of the four major cities: Fayetteville, Springdale, Rogers and Bentonville. That’s part of the impetus that has developers building new apartment complexes in the region.

It’s also why Lindsey Management is scheduled to begin the second phase of its Links of Fayetteville complex, which is expected to add another 500-plus units. Lindsey Management is also in the planning stage of a potentially massive apartment complex at the Razorback Park Golf Course in Fayetteville, a project that Lindsey said may be as many as four years from execution.

“I’ll be honest, we have probably been a little hesitant in Fayetteville and northwest Arkansas in moving as fast as we did in the past,” Lindsey said. “We’ve come to grips with ‘Hey, we feel good about this now.’

“We feel like the timing is right, now. We’ll be nervous, no doubt about it, worrying if that thing is going to fill up. Once you got it out there, you have to try to do everything you can to get it full.”

Donahue said the statistics have shown the need for more construction of multifamily units for the past three years. He said he believes developers held off to see what effect new apartments built around the University of Arkansas would have on the market.

Lindsey said it is a fact of the market that apartments aren’t just for students. “We do notice around the horn, even out of northwest Arkansas when we run our demographics, sometimes it’s shocking to see how many people aren’t students, to be truthful,” Lindsey said. “People would say build apartments around Fayetteville and students will fill them up. They contributed to it, they helped it, but it wasn’t all students.”

When that influx of student housing had no effect whatsoever on the overall market, more developers began to put shovels in the dirt.

“Three years ago, I was projecting more market-rate construction, and we never got it,” said Donahue, a multifamily housing specialist who is based in Tulsa. “You call different apartment complexes, and there is a wait list because there is nowhere for people to live.”

Kathy Deck, the director of the Center for Business & Economic Research at the University of Arkansas at Fayetteville, has seen the same market statistics in her position as lead researcher for Arvest Bank’s Skyline Report. She said figures such as a 1.5 percent vacancy rate — Rogers’ rate was 0.5 percent in the CBRE report — would typically result in one of two things: more apartments or higher rent rates for existing ones.

“When you look at anything, when rates get below 5 percent — not 1.5 percent but 5 percent — that’s what you look for in a market that is healthy,” Deck said. “When it gets substantially below that, I really do think it is a strong build sign to developers.”

‘A Paradigm Shift’

Deck said the demand for apartments is not just coming from students at the university, but from those of a certain age, born after 1980, who might not be ready to buy a house. Donahue said people aged 22-30 who are holding off buying a house represent a significant change.

“It’s a paradigm shift,” Donahue said. “They’ve seen their parents lose money. Why mess with it? That shift is propelling the multifamily market.”

Still, the apartment demand hasn’t hurt housing prices, Deck said. One might think that if so many people are choosing apartments, housing prices might drop, but Deck said the region is growing so consistently that even though a lot of people are choosing to rent, plenty are still left over to buy.

“Everybody needs housing,” Deck said. “Those markets all play with each other. I just think that is a very, very healthy signal to the market that there is room for additional competition.

“It becomes clear that we can’t live at sub-2 percent vacancy rates for long. We won’t have to. Somebody will come along and take advantage of that opportunity.”

Bert Morris, a manager with Sweetser Properties of Fayetteville, said she fields calls daily from people looking for apartments. There just doesn’t seem to be that many available.

“We’re hurting for apartments,” Morris said. “Every day, people are begging for apartments that aren’t there.”

As the CBRE report states, the region is scheduled to add about 800 units this year and nearly 1,000 in 2016. That’s not even counting student housing, which will add another 800-plus units in the next two years.

One of those complexes is the Trails of Bentonville, a Lindsey property that hasn’t fully opened but is taking deposits. Lindsey hopes the 450-plus units at the complex will be filled by Christmas.

Lindsey is cautious enough to wonder about how much northwest Arkansas can absorb, but he sees that whatever is built doesn’t stay empty long. Lindsey kept building through the recession ­­­­­­— and picked up some good deals on property — but changed tactics to build on smaller sites with a different look and layout.

“There are a lot of apartments right now being built, no doubt about it,” Lindsey said. “Every time you turn around there is somebody building something. Some of the stuff you see the competition building all over town, you think, ‘How is that going to affect us?’ Surprisingly, the market just seems to gobble it up.”

Deck and Donahue said that as long as the region continues to grow — it passed 500,000 in population last year — and add jobs, then the housing demand shouldn’t abate that much. Deck said northwest Arkansas is “still young,” and the secret to the balance between supply and demand is to not get too far ahead, which of course is easy to do if you know exactly when demand will slacken.

Lindsey said it’s hard to even guess how long northwest Arkansas will be on an upward trajectory. He said it gets to a point that you have to trust your gut and pull the trigger on a new development and then work, hope and pray it all works out.

“You can build it and they not come,” Lindsey said. “But, so far, if you’ve built it, they’ve come.”

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