The apartment vacancy rate in Pulaski County was little changed in the fourth quarter last year compared with the third quarter, according to owners of a firm that follows the central Arkansas apartment market.
The vacancy rate was 8.7 percent in the last three months of 2014, up from 8.3 percent in the third quarter, the Multifamily Group said.
The vacancy rate in the fourth quarter last year was as high as it's been in 10 years, Richard Cheek, an owner of Little Rock-based Multifamily Group, said Wednesday.
Typically, the vacancy rate is between 6 percent and 8 percent in Pulaski County, Cheek said. He said he expects vacancy rates to improve this year.
Nationally, the apartment vacancy rate was 4.7 percent in the fourth quarter of 2014, according to MPF Research of Carrollton, Texas.
There were almost 250,000 apartment units built last year nationally, but instead of rising, vacancy rates fell 0.3 percentage points, MPF said. Having a vacancy rate of about 5 percent "is still essentially full," Greg Willett, a vice president for MPF, said in a statement.
What drives the vacancy rate is a combination of supply and demand, said Michael Pakko, chief economist at the Institute for Economic Advancement at the University of Arkansas at Little Rock.
"Some of the additional capacity through new construction has, at this point, outstripped the demand," Pakko said. "That's not necessarily a long-term trend."
New construction for apartments has increased because investors in residential real estate have realized that after the last recession that the balance of home ownership compared with renting has changed, Pakko said.
There were 678 newly built apartments that opened in the county last year, Cheek said.
The Pulaski County market is softer than the national apartment market, said Ted Bailey, also an owner of the Multifamily Group.
"But having occupancies at 91.3 percent [or 8.7 percent vacancies] is not terrible," Bailey said.
The main reason for high vacancy rates in Pulaski County, Bailey said, is that it is home to the oldest group of apartments in the county, those built in the 1970s and earlier.
The older apartments have a vacancy rate of 11.7 percent, Bailey said. The way most of them were built now is functionally obsolete, he said.
"They may have two bedrooms but only one bath, or small galley-style kitchens that may not have been upgraded with the latest plumbing features or countertops," Bailey said.
Properties built in the 1980s or 1990s are more competitive, he said.
The Pulaski County job market is picking up momentum, which could decrease the vacancy rate, Pakko said.
"So I would expect to see perhaps some additional in-migration to central Arkansas as one of the big economic hubs of the state," Pakko said.
The average monthly rent was $723 in the fourth quarter, up $2 compared with rents in the third quarter.
Apartments built after 2010 have an average rent of $939, while those built in the 2000s rent for an average of $844, 1990s units rent for $758, 1980s units for $680, and 1979 and older units rent for an average of $625.
Business on 02/19/2015