Report anticipates more apartment growth in Northwest Arkansas

Market for 0ff-campus student housing less clear

NWA Democrat-Gazette/DAVID GOTTSCHALK Work continues on construction of Beechwood Village, a 671-bedroom housing complex south of Martin Luther King Jr. Boulevard and east of Beechwood Avenue in Fayetteville. It’s scheduled to open in August of this year. For photo galleries, go to nwadg.com/photos.
NWA Democrat-Gazette/DAVID GOTTSCHALK Work continues on construction of Beechwood Village, a 671-bedroom housing complex south of Martin Luther King Jr. Boulevard and east of Beechwood Avenue in Fayetteville. It’s scheduled to open in August of this year. For photo galleries, go to nwadg.com/photos.

Northwest Arkansas vacancy rates remain low, making the region attractive for market-rate apartment developers.

The forecast for off-campus student housing is less clear.

Vacancy rates

Vacancy rates for market-rate apartments averaged about 2 percent in Northwest Arkansas in 2014, down from 3.5 percent at the end of 2013.

2014 2013

Fayetteville 2.5% 2.5%

Springdale 2.5% 5%

Rogers 1.5% 1.5%

Bentonville 2% 6.5%

Northwest Arkansas 2% 3.5%

Source: CBRE Northwest Arkansas

Just 2 percent of the more than 22,000 apartment units CBRE Northwest Arkansas analyzed in a recent market survey were vacant at year's end.

That's the lowest vacancy rate the commercial real estate company has recorded since it began a regional apartment survey in 2010. The 2013 vacancy rate in Washington and Benton counties was 3.5 percent.

"The Northwest Arkansas apartment market continues to remain extremely strong," Brian Donahue, CBRE senior associate, said in the report.

By comparison, about 5 percent of the region's market-rate apartment units were vacant at the end of 2011.

"When you have several quarters in a row or several months in a row where you're sitting at a vacancy rate of less than 5 percent, it's an indication that somebody's going to be looking pretty hard to see if they can start filling a need," Kathy Deck, director of the Center for Business and Economic Research at the University of Arkansas, said this week. "Right now, we're in a position where low vacancy rates are going to lead to new projects coming on."

CBRE's report doesn't include occupancy numbers or rental rates for off-campus student housing complexes. Unlike market-rate apartments, where a renter pays a set rate for a single unit, the student housing complexes rent space by the bedroom. The complexes are furnished, and utilities are typically paid. Students share a common living area, much like a suite-style dorm.

Five such off-campus housing complexes have added more than 3,000 bedrooms to Fayetteville's housing stock over the past three years.

They include the Grove, where the Washington County Livestock Auction used to be; University House, southwest of Beechwood Avenue and Martin Luther King Jr. Boulevard; the Vue, which overlooks Fayetteville High School; and Sterling Frisco, on West Avenue between Maple and Lafayette streets.

The Cardinal at West Center, just south of the university's Harmon Avenue Garage, was the only 50-plus-unit complex that opened in Washington and Benton counties in 2014, according to the CBRE report. No market-rate apartment projects of that size were built.

Seth Mims, president of Specialized Real Estate Group, the Fayetteville-based company that partnered with out-of-state firms to build Sterling Frisco and the Cardinal, said Wednesday off-campus student housing growth has come in response to increased university enrollment.

According to the university's Office of Institutional Research, enrollment has climbed 2,142 students, from 23,199 to 25,341, since 2012. About 17,000 students were enrolled in 2005.

"The tremendous growth of the university was unanswered by apartment development," Mims said.

Another four student housing complexes are in the works near campus.

Specialized Real Estate Group and Dallas-based Fountain Residential Partners are building a 671-bedroom complex called Beechwood Village about two blocks from Baum Stadium.

Construction on a 233-bedroom complex called Gather on Dickson is underway at St. Charles Avenue and Watson Street, across from the Dickson Street Post Office.

The Houston-based Dinerstein Companies plan to open Sterling Frisco Phase II, with 559 bedrooms, along Lafayette Street in fall 2016.

And demolition work is beginning on a 640-bedroom complex called Harvey's Hill, across Duncan Avenue from the Cardinal. Specialized Real Estate Group was involved in the pre-development process for Harvey's Hill, but, according to Mims, the company sold its development rights to Indiana-based Trinitas Ventures.

Specialized Real Estate's latest apartment project, called the Uptown Apartments, is a signal the company may be shifting away from the types of student housing complexes it has built downtown in recent years.

The 308-unit complex, planned across Steele Boulevard from the Malco Razorback Cinema, is intended to appeal to young professionals -- not university students. Units will be rented as a whole -- not by the bedroom.

"Our focus is definitely market-rate apartment development," Mims said following an Oct. 27 Fayetteville Planning Commission meeting when the project was unanimously approved.

Lindsey Management is also re-entering the Fayetteville market, after several years on the sidelines. The company plans to build Phase II of the Links at Fayetteville, adding 516 apartmens and 39 row houses to the development near Wedington Drive and Rupple Road.

"Occupancy has finally stabilized, and the owners of the Links are comfortable that market conditions are acceptable to begin the process of building additional apartment homes," Hugh Jarratt, Lindsey's in-house attorney, said in a Dec. 16 letter to Fayetteville planners.

Jarratt said earlier this year Lindsey hasn't been concerned with competition from student housing developers.

"Our developments are market rate," he explained. "We have some students, but it's not solely student-based development. We are confident in the growth in Fayetteville, and our development's more based on the town as a whole growing -- not necessarily the university."

Fayetteville's overall population grew 5,380 residents, or 7.3 percent, from 73,580 in 2010 to 78,960 in 2013, according to U.S. Census Bureau estimates.

Washington and Benton counties, as a whole, grew 29,303 residents, or 6.9 percent, from 424,404 to 453,707, over the same period.

To meet that growth, other market-rate apartment complexes are under construction or in the planning stages throughout the region.

In Rogers, a 200-unit luxury complex called the Pinnacle Point Apartments is being built on about 8.5 acres behind Pinnacle Hills Promenade. Phase I is scheduled to open by this fall.

Rogers planning commissioners in November permitted another apartment project called the Palisades at Pleasant Grove on 19.8 acres near Academy Sports on south 26th Street. Development plans haven't yet been approved.

Three market-rate apartment projects are also in the works in Bentonville.

Lindsey is building a 487-unit complex called the Trails at Rainbow Curve near its Links at Rainbow Curve. The apartments are scheduled to open later this year.

Thrive Bentonville will feature 62 units in a three-story, mixed-use building on Southwest A Street, one block west of the public library and less than a half-mile south of the Bentonville square.

In December, the city's Planning Commission approved plans for a 216-unit apartment complex called the Parc at Bentonville. The development will cover nearly 80 acres on the west and north sides of Southwest Regional Airport Boulevard where it curves west at Southwest Windmill Road.

CBRE's report predicts market-rate vacancies will increase 1 percent in 2015 as a result of all of the construction.

As for the student housing market, Deck said the picture is less clear.

"We're at a place where the university has been experiencing such enormous growth rates," she said. "And, as we get a new administration in, as we know is coming, they'll set the course for what kind of strategic plan there will be for students in the future."

The university has begun a national search to replace Chancellor Dave Gearhart, who is stepping down this summer.

"You could understand multifamily developers or student housing developers, in particular, wanting to have a much better sense of what that strategic plan will be before they jump right in," Deck added. "So there may be a pause as a result of that. Or there may not be."

Joel Walsh can be reached by email at [email protected] or on Twitter @NWAJoel.

A Section on 03/01/2015

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