$1,059 1Q 2024
0.6%
94.5% 1Q 2024
-120 BASIS POINTS
5.6% (FEB 2024)
13.9% (FEB 2024)
* Please note that these employment figures have been adjusted for seasonal variations and are based on Moody’s Analytics forecast as of January 1, 2024.
** Please note that these unemployment rates are estimates that have not been adjusted for seasonal variations, and they are derived from Moody’s Analytics forecast as of January 1, 2024.
QUARTERLY DEMAND
QUARTERLY COMPLETIONS
In the first quarter of 2024, the apartment market in Northwest Arkansas continued to show stable performance with a positive net absorption of 136 units. Among the nine submarkets, only one experienced net move-outs during this period. Central Benton County stood out, leading the market with 172 net new units occupied, highlighting its significant role within the region.
During the same quarter, the apartment inventory in Northwest Arkansas expanded by 503 units, building on the 1,574 units completed in the previous three quarters. Over the past year, Central Benton County, Northeast Washington County, and Fayetteville have emerged as the primary development hotspots. However, in the most recent quarter, all of the 503 new units were added solely in Central Benton County, making it the exclusive contributor to the expansion of Northwest Arkansas’ apartment market.
In Northwest Arkansas, occupancy rates have felt the pressure of supply outstripping demand over the last four quarters, resulting in a current rate of 94.5%, just below the five-year average of 94.8%. Despite recent supply-side pressures, the manageable current construction pipeline suggests that this dip may be a temporary fluctuation rather than an indication of a longer-term market downturn. More than half of the nine submarkets in the region reported occupancy rates above 95%, with Southwest Benton County leading at 98.3%. In contrast, Central Benton County, which has struggled to absorb 1,326 new units introduced over the past year, recorded the lowest occupancy rate at 91.5%.
Average Monthly Mortgage Payment
New lease rents in Northwest Arkansas saw a modest increase of 0.6% year-over-year, aligning with the national rate of growth and bringing the average monthly rent to $1,059. Performance is stronger in mid-tier assets, which registered just below 2.0% growth over the past year. However, luxury properties are experiencing supply-side pressures that have kept rent growth mostly flat, pulling the overall market growth rate down to below 1%. The Central Benton County Submarket, which has received many of the new deliveries in the metro area over the past 12 months, displayed the weakest rent performance, with a 2.7% decline in rents annually.
Average Monthly Rent
The softening of investment activity in Northwest Arkansas has been significantly influenced by elevated interest rates, which have increased the cost of debt for property acquisitions. This surge in rates has led to a pronounced bid-ask spread between buyers and sellers, contributing to a slowdown in transactions. In the first quarter, sales volume plummeted to $5.1 million, a sharp 75.4% decline from the $20 million recorded during the same period last year. Only one sale was registered this quarter, though this number could increase as late March transactions are accounted for.
Despite the current slowdown, there is optimism for the remainder of the year. More stable interest rates anticipated later in the year could help narrow the bid-ask gap. Along with the region’s thriving economy and strong market fundamentals, these factors are expected to rejuvenate investor interest in Northwest Arkansas as the year progresses.
* Trailing 4Q average PPU
* Preliminary Data from RCA – Individual transaction $2.5M +
Please note that the income and expense data presented in this section is sourced from third-party providers. Our firm does not provide any warranty or guarantee as to the accuracy or reliability of this information. We recommend that users exercise their own discretion and professional judgment when interpreting and utilizing this data.
| Income Assumptions | Value / Unit | Year Change (%) |
|---|---|---|
| Rental Income / Occupied Unit | $901.18 | 12.1% |
| Recoverable Expenses / Occupied Unit | $23.68 | 14.5% |
| Other Income / Occupied Unit | $36.98 | -6.3% |
| Total Income / Occupied Unit | $961.83 | 11.3% |
| Rental Income | $873.95 | 11.1% |
| Recoverable Expenses | $22.96 | 13.4% |
| Other Income | $35.86 | -7.2% |
| Total Income | $932.76 | 10.3% |
| Operating Expenses | Value / Unit | Year Change (%) |
|---|---|---|
| Payroll | $79.95 | 4.3% |
| Repairs & Maintenance | $11.68 | 5.6% |
| Leasing | $39.26 | 6.8% |
| General | $29.01 | 0.7% |
| Marketing & Advertising | $6.92 | 3.3% |
| Repairs & Maintenance | $105.27 | 8.2% |
| Cleaning | $12.15 | 12.3% |
| Roads & Grounds | $13.26 | -1.6% |
| General | $79.86 | 9.3% |
| Administrative | $19.36 | 6.4% |
| Security | $3.17 | 26.6% |
| General | $16.19 | 3.1% |
| Management Fees | $45.93 | 11.4% |
| Utilities | $32.02 | 1.6% |
| Electric | $12.57 | -3.8% |
| Gas | $0.94 | -21.3% |
| Water/Sewer | $18.51 | 7.6% |
| Real Estate & Other Taxes | $61.80 | 5.4% |
| Insurance | $32.98 | -3.1% |
| Other Operating Expensees | $0.62 | |
| Total Operating Expense | $384.87 | 5.6% |
| Value / Unit | Year Change (%) | |
| Net Operating Income | $547.90 | 13.9% |
|---|
The rental housing market in Northwest Arkansas continues to show resilience, driven by significant demographic growth in key submarkets and a steady development pace. Although occupancy rates have slightly declined due to increased housing supply, the construction of new apartments is being kept within manageable levels. The local economy is experiencing robust growth, fueled by the expansion of major corporations like Walmart, Tyson Foods, and J.B. Hunt, along with a growing ecosystem of suppliers and service providers related to Walmart. This expansion is reinforcing the region’s economic base.
Currently, there are 2,372 housing units under construction, with 1,201 expected to be completed in the next four quarters. Looking ahead, the apartment market in Northwest Arkansas is well-positioned for a rebound, thanks to strong market fundamentals and the ebb and flow of market conditions. With construction activity normalizing and net absorption projected to exceed 1,000 units by the end of the year, the demand-supply gap is anticipated to narrow. Furthermore, with construction remaining limited in most submarkets, occupancy rates are expected to stay strong over the next 12 months, indicating a positive outlook for the local real estate market.
