Arvest Bank recently released Skyline Reports for all three sectors of real estate – residential, commercial and multifamily – in Northwest Arkansas for the first half of 2020.
Mervin Jebaraj, the director of the Center for Business and Economic Research (CBER) at the Sam M. Walton College of Business at the University of Arkansas, indicated the real estate market in Northwest Arkansas has weathered the economic fallout from the COVID-19 pandemic well.
“So far the pandemic has not seemed to hurt the real estate market in the region, and the three areas measured by these reports continue to reflect a consistent balance between supply and demand,” he said. “Part of that consistency is a continued contraction in the supply of homes for sale across the region, which continues to drive home prices higher.”
In the first half of 2020, the number of homes listed for sale decreased 48.8% from the first half of 2019 – from 2,357 to 1,206. Simultaneously, available lots on which to build new homes fell to 3,896 – its lowest point since the inception of the Skyline Report in 2004.
“It is possible that the pandemic may have suppressed, or delayed, individuals from listing their homes for sale, but the historic low interest rates for mortgages is enticing many consumers to want to purchase,” Jebaraj said. “Until more inventory is available, it will be difficult for homebuyers to find a home to buy.”
In the multifamily market, vacancy rates increased from 3.5% in first half of 2019 to 4.8% as a result of construction of new developments being completed and new units entering the market. Average rent prices for multifamily units increased 4.7% from the first half of 2019 to $729.82. The pace of multifamily construction will remain strong in the near term, as $481.5 million in building permits have been issued in the past year, a record high for the Skyline Report.
In the commercial real estate market, the overall vacancy rate across all submarkets fell from 11.0% to 10.8% compared to the first half of 2019.
“So far the office submarket has remained stable despite the increase in employees working from home,” Jebaraj said. “At this point it seems that even if the work-from-home trend continues, it will likely not have a significant impact on office space in the region, as any potential loss from remote work will be offset by the need for more space per employee. We are hearing that many high-density open space plans will likely transition to more cubicles, walls and lower density for safety reasons.”
The retail submarket vacancy rate rose from 9.4% in the first half of 2019 to 10.6%.
“With many retail establishments feeling the impact of the pandemic, it isn’t surprising to have a small increase year-over-year in this submarket, and we will be watching this particular area closely in the coming months,” Jebaraj said. “It is also important to note that, for the most part, this report doesn’t include the majority of restaurant properties since many restaurants have standalone structures and are not renting space from retail developers.”
“In the midst of the pandemic economy, we are pleased to see that the overall real estate market in the region remains healthy,” said Brad Crain, president for Arvest in Benton County. “We are certainly seeing strong activity in our mortgage division as customers are entering the homebuying market and seeking refinancing of their current homes as a result of low interest rates. Our advice to customers is to get prequalified for a mortgage before searching for a home, because that will enable them to move quickly when they find the right home.”
The Arvest Skyline Report is a biannual analysis of the latest commercial, single-family residential and multifamily residential property markets in Benton and Washington counties. The report is sponsored by Arvest Bank and conducted by CBER.
In 2004, Arvest Bank contracted with CBER to collect information about the local real estate markets. CBER researchers aggregated and analyzed data from local governments, property managers, visual inspections and the business media to provide a complete picture of the status of property markets in the two counties.
CBER provides excellence in applied economic and business research to federal, state and local government, as well as to businesses currently operating or those that desire to operate in the state of Arkansas. The center further works to improve the economic opportunities of all Arkansans by conducting policy research in the public interest.