Wary homebuyers fuel apartment boom

In Pulaski County, as in U.S., rise in new units to continue

The Park Avenue Lofts apartments (background) are part of the Park Avenue center that includes a Target and other retail stores.
The Park Avenue Lofts apartments (background) are part of the Park Avenue center that includes a Target and other retail stores.

— Apartment building in the nation’s 82 biggest urban areas, including Pulaski County, is expanding rapidly, with many people still reluctant to buy houses in the wake of the burst housing bubble, according to experts.

The Multi-Family Group, consisting of Little Rockbased apartment brokers and consultants, projects that the number of new units in the county in 2013 will more than double the annual average for the past decade.

The group estimates the county’s apartment inventory at 28,000 units and projects that it will grow by nearly 1,700, or 6 percent, next year, compared with the annual average of about 3 percent, said Ted Bailey, a partner in the group.

In the United States, according to The Multi-Family Group, 87,000 units will be completed this year while the number is projected to reach 127,000 in 2013 — a 46 percent increase.

Home sales and values skyrocketed in the early 2000s, spurred by increasingly lenient mortgage-lending policies. But after the peak of the market in 2006, foreclosures escalated and housing values plummeted. Home-buying declined sharply, and the nation fell into a recession in late 2007. The recession officially ended in June 2009.

Home ownership in the nation and in Pulaski County has dropped steadily, starting in 2005, according to U.S. Census Bureau data compiled by Metroplan, a nonprofit organization that assists governments in the metropolitan Little Rock area.

Home ownership in the nation stood at 66.9 percent of households in 2005, and by 2011 had fallen to 64.6 percent, according to the data. Pulaski County was at 62 percent in 2005 and fell to 58.4 percent in 2009, but rose to 61.7 percent last year.

Previously owned and new home sales in Arkansas were up 2.4 percent in the 12-month period that ended in October, compared with the previous corresponding period, according to the Ar- kansas Realtors Association.

Nationally, sales of previously owned homes, which constitute about 90 percent of the market, were up 10.9 percent compared with a year earlier, according to the National Association of Realtors.

The national median price for previously owned homes was $178,600 in October, which is 11.1 percent higher than a year ago, the national association said.

Apartment vacancy rates in the top 82 metropolitan areas are the lowest since 2001, Brad Doremus, senior analyst at real estate research firm Reis Inc., wrote in an article published by the National Apartment Association. There were no numbers available for any other metropolitan area in Arkansas, according to Paul Bergeron, director of communications for the association.

New-construction occupancy in Pulaski County as of the third quarter of 2012 stood at 94.9 percent, according to The Multi-Family Group, which is in line with an average of 95 percent for the previous decade, though it dipped to 92.9 percent in 2009 during the recession.

The average for the 82 metropolitan areas tracked by Doremus was 95.4 percent for the quarter.

The market is tight, and “the demand is tremendous,” said Blake Jackson, a partner in the family-owned Monde Group, which is making its entry into the Pulaski County market with The Villa at River Pointe Drive in Maumelle.

And competition is stiff. Jackson, whose group includes his brothers and father — who have backgrounds in architecture and development — is pricing The Villa higher than the new-construction average of 88 cents a square foot.

The 216 apartments — half of which will be on the market in a year — will range from about 700 square feet to 1,200 square feet at $750 to $1,200 a month, or at least $1 a square foot, Jackson said.

The Villa’s demographics are like those targeted by John Burkhalter’s Fountaine Bleau Apartments North in North Little Rock, Jackson said.

Amenities — beyond the typical upscale list of granite countertops, custom cabinetry and hardwood floors — count. “We’ve got some of the biggest balconies in this market,” Jackson said.

Despite the high demand, rent has risen only slightly in the past year, increasing 1.1 percent for new-construction quarters, and 0.5 percent for apartments of all ages, the group reported.

With the supply/demand curve in favor of the lessor, some developers are focusing on the upscale market.

Strode Property Co. and Lang Partners, both of Dallas, plan to offer 258 planned units in the Park Avenue Lofts next year, starting in the first quarter. The buildings, near Little Rock’s West Markham Street and University Avenue, are nearing completion.

John Ausburn of Lang Partners describes the apartments as urban and upscale.

“We think it’s a phenomenal location, and we think the project will do very well,” Bailey said. “If you are in the medical community, this is going to be an extremely convenient location for you,” close to several hospitals.

Little Rock City Director Stacy Hurst recalled the struggle to rid the area of the blighted University Mall, which was finally demolished in 2008 to make way for the Park Avenue center.

The city commissioned a study by the Washington-based Urban Land Institute, which recommended a mixed-use development for the site.

With the arrival of the apartments, after the opening of a Target store, other retailers and restaurants, it has become that.

“It’s been a long time coming,” Hurst said.

Ausburn, vice president of development for Lang Partners, said the Park Avenue units will range from 600 square feet to 1,500 square feet.

Rent will be more than $1 a foot, he said, adding that most of the units will have balconies.

While the pendulum has swung toward renting, it will eventually go in the other direction, said Bruce Lindeman, professor of real estate and finance at the University of Arkansas at Little Rock.

“Two or three years ago, there was a deficit in the amount of apartments. It was a seller’s market,” said Lindeman, who is one of the authors of Barron’s Dictionary of Real Estate Terms.

“My feeling is we are approaching the crest of the boom. I would not be the least bit surprised to see that a lot more construction is going to go on in 2013. Because right now the market is pretty tight.

“If you’re opening up a project today, it’s not hard to get that rented out very quickly.”

Business, Pages 71 on 12/16/2012

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