MARKET SNAPSHOT
Construction activity in the Northwest Arkansas market slowed during the second half of 2024. However, development in the region remains near historical averages, showing only slight declines compared to the significant downturns starting to be seen in most other Sun Belt markets. Strong interest in development persists, fueled by ongoing population growth and in-migration, despite elevated financing costs for new projects.
At the end of 2024, 2,536 units were under construction, just below the 10-year average of 2,780 units. Multifamily starts in 2024 declined modestly by 13% to 1,554 units, marking the second consecutive year below the 10-year historical annual average. Looking ahead, unit completions are expected to drop sharply in 2025, with a projected 46% decrease to 1,381 units—1,195 fewer than in 2024. This significant reduction in completions is likely to impact supply dynamics, potentially tightening market conditions in the near term.
Recent developments have been concentrated in the northern portion of the region, particularly in the Central Benton County and Northeast Washington County submarkets, reflecting the area’s strong population growth. Bentonville and Rogers, key parts of Central Benton County, continue to attract substantial development, supported by a robust local economy with rapid job creation and high demand for housing. Nearly all of the under construction inventory is located in these two submarkets, with Fayetteville being the only other area with projects underway.
Occupancy rates in Northwest Arkansas have been under persistent supply-side pressure due to ongoing construction activity designed to keep up with the region’s steady population growth. However, the market has demonstrated resilience, with average occupancy rates increasing by 30 basis points in 2024. This improvement was driven by surging renter demand, as net absorption reached nearly 2,100 units—a figure approaching an all-time high and reflective of the region’s robust housing demand.
The pressure from new competition is expected to ease significantly in 2025, as deliveries are projected to decline swiftly. Additionally, the region’s economic expansion, anchored by a thriving job market and corporate investments, will likely continue to attract new residents, further supporting occupancy improvements. Looking ahead, these favorable conditions are expected to stabilize occupancy rates and drive greater demand for existing inventory, reducing vacancy levels across key submarkets.
Rent growth fluctuated throughout 2024, increasing from 1.2% at the start of the year to 2.0% by the fourth quarter. Although this growth remains below the historical average of approximately 3.5%, it highlights the market’s resilience despite a surge in new supply. Furthermore, rents continue to outpace the national benchmark of 1.1%, underscoring the region’s strength amidst challenging market conditions.
The area’s rapidly expanding population and strong economic growth, combined with a 46% drop in new completions projected for 2025, will alleviate competitive pressures and reduce the reliance on concessions. This more balanced supply-and-demand dynamic is expected to support accelerated rent growth in the short term. By the end of 2025, average market rents in the region are projected to increase at an annual rate of 2.9%, significantly outperforming regional peer markets like Little Rock. These factors position the market for steady improvement and make it an increasingly attractive option for renters and investors alike.
Submarkets along the I-64 corridor—including West County, Central West End, and St. Charles County—are the region’s highest-rent areas, with average rents exceeding $1,430 per month. These submarkets feature the region’s highest median incomes and the largest concentration of upper-tier properties. However, increased supply has moderated rent growth in some of these areas. For example, the Central West End recorded an average effective rent increase of less than 1% in 2024 due to the impact of new supply. Conversely, St. Charles County has experienced the strongest annual rent growth in the market, with a 3.6% increase in 2024 and a 5% increase forecasted for 2025. The county’s steady household growth has sustained its robust performance and highlights its role as a key growth area within the region.
12-month period ending November 2024
The Northwest Arkansas multifamily market is well-positioned for steady growth in 2025, driven by strong economic fundamentals and a robust population expansion. Despite a surge in new supply in recent years, construction activity is starting to subside, with completions projected to decline sharply by 46% in 2025. This reduction in new deliveries is expected to create more balanced supply-and-demand dynamics, alleviating competitive pressures and supporting stable occupancy levels. Additionally, major employers like Walmart, Tyson Foods, and J.B. Hunt are expanding their operations in the area, ensuring the long-term sustainability of key economic drivers and continuing to fuel demand for housing across the region.
Occupancy rates are expected to remain resilient, with an average of 95% forecast for 2025, only slightly below the historical average despite the pressures of recent supply. Meanwhile, rent growth is projected to accelerate, increasing by 2.9% annually by year-end 2025, significantly outpacing the national average. The shrinking construction pipeline and declining use of concessions will further support rent increases. High-growth submarkets, such as Central Benton County and Northeast Washington County, will remain focal points for development and demand, reflecting their economic vitality and appeal to residents.
Overall, Northwest Arkansas continues to attract both renters and investors due to its affordability, thriving economy, and strong population growth. These factors, combined with a more balanced construction pipeline, create a favorable environment for market stability and long-term investment opportunities in the region.
