Low Vacancy Rates Prompt Developers To Build New Apartments

STAFF PHOTO BEN GOFF • @NWABenGoff Construction continues Thursday on Lindsey Management’s 487-unit Trails at Rainbow Curve apartment complex near the company’s The Links at Rainbow Curve in Bentonville.
STAFF PHOTO BEN GOFF • @NWABenGoff Construction continues Thursday on Lindsey Management’s 487-unit Trails at Rainbow Curve apartment complex near the company’s The Links at Rainbow Curve in Bentonville.

Low vacancy rates helped revive apartment construction in Northwest Arkansas.

The area's apartment occupancy rate in the first six months of this year averaged 96 percent. Rates ranged from a high of 98 percent in Rogers to 95 percent in Fayetteville, according to the mid-year apartment market survey compiled by CB Richard Ellis, a commercial real estate brokerage firm.

By The Numbers

Apartment Rents

Below are the average rents for a two-bedroom, two-bath apartment in Northwest Arkansas.

City*Average Rent*Average Square Footage*Rent Range

Rogers*$855*1,155*$405-$1,130

Bentonville*$713*990*$545-$820

Fayetteville*$897*1,135*$550-$1,530

Springdale*$613*986*$520-$710

Source: CB Richard Ellis

"We are entering a new phase in construction," said Brian Donahue, senior associate with the firm.

Projects in various stage of construction include those geared toward college students in Fayetteville, a large Lindsey Management complex and mixed-use development in Bentonville and an upscale apartment building in Rogers.

Donahue said the area's growing population and economy are creating opportunities for developers.

The Northwest Arkansas Council estimates the region's population recently surpassed the 500,000 mark. A study by IHS Global Insight predicts the area's economy will grow 4.2 percent annually through 2020, making it the third-fastest growing economy in the nation among large metropolitan areas.

Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas, said developers take notice when vacancy rates fall below 5 percent, especially if the rates stay low for a prolonged time. Occupancy rates were 95 percent at end of 2011.

"It's not surprising it took a while," she said of apartment construction, pointing to banks with tighter lending standards and developers waiting to see how the housing market and complexes built for college students fared.

The University of Arkansas' growing student population helped generate new apartments in Fayetteville.

University administrators expect enrollment to pass 28,000 in 2015; it was about 18,000 students in 2005.

Four apartment complexes opened in Fayetteville over the past two years, adding 864 units and 2,582 bedrooms to the market. Space in those new complexes is rented by the bedroom and not the unit so residents don't have to pay for a roommate who moves out or find a replacement.

Specialized Real Estate Group opened Sterling Frisco near the university campus last year and is set to open The Cardinal at West Center, with 150 units and 470 bedrooms, this fall.

The Fayetteville-based company has three additional rent-by-the-bedroom projects in various stages of development: Beachwood Village, 213 units with 670 bedrooms, fall 2015; Harveys Hill, 130 units with 432 bedrooms, fall 2016; and a yet-to-be-named project, 250 units with 559 bedrooms, fall 2016.

Seth Mims, president of the Fayetteville-based company, said his organization has different partners for each project.

"All the projects are different. None look alike or are cookie cutter," he said. "It takes more time, money and energy."

Scott Rogerson, chief financial officer for Lindsey Management, said construction is under way on The Trails at Rainbow Curve in Bentonville and he expects it to be completed in fall 2015.

Lindsey Management manages more than 11,000 apartment units in Northwest Arkansas, about a third of the total market. The Trails will add 487 apartments in Bentonville in 27 buildings.

Fort Smith-based ERC is building Thrive, a 62-unit development with retail space, in downtown Bentonville.

Troy Galloway, Bentonville's director of community and economic development, said Thrive ties in well with the city's newly established Arts District and downtown master plan.

"It's where we have services available and will be very convenient," he said. "I hope it's a trend that continues."

ReGina Rotert, ERC spokeswoman, said Thrive is scheduled to open in February. The company will start leasing units in August.

Both retail spaces are leased. Rotert said Crepes Paulette will use one; the other unit is leased but the tenant isn't ready to go public.

"We are going to try and connect our residents with everything there is to do in Bentonville," she said. "It's all about connectivity and location. It will be more of an experience than just a place to live."

She said wouldn't provide lease prices and said each unit is different so rates will vary.

CBRE reported that average rental rate for all apartments rose $12 per month to $600 in the first half of the year compared to the end of 2013.

Rates for four-bedroom apartments rose the most at $74 per month to $987.

NW News on 07/18/2014

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