The Ridgeview Report
The Case for Northwest Arkansas
In this issue, we dive into why Northwest Arkansas (abbreviated NWA) stands out as an attractive multifamily market and shed light on its multifamily potential.
One year ago, I was sitting down for coffee with the Chief Investment Officer of a real estate firm that owns 19,000 apartment units nationwide. I asked him what real estate market he was most excited about, and his answer was Northwest Arkansas. At the time, their firm owned 700 units in the area, and today they have over 1,000. Located in NWA, Walmart's corporate headquarters serves as the main catalyst for the area's development, employing a workforce of 14,000 and significantly propelling the region's growth. The Walton family has also been involved in philanthropic efforts aimed at supporting the development of infrastructure in the region. Their contributions have helped fund projects such as roads, parks, cultural institutions, and educational facilities, enhancing the overall quality of life for residents. In addition, more than 1,300 Walmart suppliers have offices in Northwest Arkansas, most within 30 miles of the Walmart home office.
A week ago I was visiting NWA for building tours and meetings with brokers. On this trip, I noted several key elements that affirm this market's potential: 1. Walmart Corporate Headquarters: A Beacon of Economic Activity NWA proudly hosts the global retail giant Walmart Inc. The presence of this corporate powerhouse infuses the region with substantial economic growth, fostering a booming job market and stimulating local businesses. Walmart is in the process of building a 350-acre headquarters campus comprised of more than 30 buildings, including office buildings, service buildings, parking decks, and amenity buildings. Additionally, the campus will feature expanded food offerings, convenient parking, fitness and wellness options, and a childcare facility.
2. Economic Growth
The burgeoning economy of NWA has consistently surged forward, drawing the attention of entrepreneurs, businesses, and investors. Housing, restaurants, shops, and entertainment destinations are all being rapidly built to handle the influx of new residents. 3. Infrastructure Investment thrives in an environment with a robust infrastructure. Each municipality in NWA has diligently invested in its roads, utility services, playgrounds, public parks, and public transportation, amplifying its appeal to investors and enhancing the overall quality of life for residents. 4. Affordable Living NWA boasts a cost of living advantage over larger metropolitan areas, making it a magnet for those seeking both affordability and an enriched lifestyle. In 2023, the average asking rent was $1,046, while the median home price stood at $359,970. 5. Mountain Biking Yes, you read that right. Thanks to a couple of Walmart heirs who are avid mountain bikers, millions of dollars have been pumped into turning NWA into a mountain biking Mecca. Bentonville's 250 miles of professionally maintained mountain biking trails, combined with its connection to expansive trail systems, have crowned it the "Mountain Biking Capital of the World."
8. Entertainment The Walmart Arkansas Music Pavilion, affectionately known as the Walmart AMP, stands as a premier entertainment hub hosting top-tier artists and comedians. The AMP is also the biggest stage house in Arkansas, accommodating 11,000-plus people. This year the venue will host big names such as Snoop Dogg, Lynyrd Skynyrd, Eric Church, Luke Bryan, and Sting. 8. Proximity to the Ozark Mountains The Ozarks are a haven for outdoor enthusiasts. Hiking, biking, and horseback riding trails wind through the hills and forests, offering breathtaking vistas and opportunities to explore the region's natural beauty. Popular trails in the area include the Ozark Highlands Trail, which spans over 200 miles through the Ozarks, and Devil's Den State Park, known for its unique rock formations and hiking trails.
How this translates to an ideal landscape for investing in Multifamily:
Remarkable Rent Growth: NWA saw a 7.0% rent growth in 2021 and an impressive 10.6% in 2022, reflecting a robust and expanding rental market.
Low Vacancy Rates: The vacancy rate stood at 4.8% in 2022 and further decreased to 4.3% in 2023, underscoring the region's strong demand for housing.
Thriving Income Levels: With an average median income of $71,767 in 2021, NWA's income levels outshine the state average of $50,784, sustaining demand for quality housing.
Population Surge: A population surge of 24% between 2010 and 2020, with an influx of 106,000 residents, is a testament to NWA's allure. Presently, an estimated 30 people are moving to Northwest Arkansas daily.
Northwest Arkansas has emerged as a dynamic multifamily market, fueled by strong indicators of growth and demand. The region's rent growth underscores a flourishing apartment market. Low vacancy rates demonstrate an unwavering appetite for housing. Strong income levels significantly surpass the state average. Lastly, a 24% increase in population from 2010 to 2020 testifies to NWA's undeniable allure as a multifamily market.
Market News
Walmart Helped Put Northwest Arkansas on the Map. Now Everybody Wants a Piece of It.
Northwest Arkansas, which borders Oklahoma and Missouri and rests along the Ozark Mountains, is experiencing a major growth spurt. With an estimated population of 543,749 in 2021, the area, which includes the cities of Bentonville, Fayetteville, Bella Vista, Lowell, Springdale, and Rogers, is projected to grow to an estimated 858,283 by 2040, according to the Northwest Arkansas Regional Planning Commission. That is compared with an estimated 370,555 people who called the area home in 2005. Source: Wall Street Journal. (2023, Mar 15). Walmart Helped Put Northwest Arkansas on the Map. Now Everybody Wants a Piece of It. https://www.wsj.com/articles/northwest-arkansas-real-estate-market-180f9a15
Tips and Tricks
Tip: Why Population Growth is Key
A growing population creates a higher demand for housing. As more people move into an area, the need for housing units expands, leading to increased occupancy rates, higher rental rates, and property prices. Higher rental rates directly contribute to increased cash flow for property owners. As rents rise, the rental income generated from the property also grows, leading to greater profits for the investor. A growing population often indicates a vibrant and dynamic local economy. New businesses, job opportunities, and infrastructure improvements may emerge to support the increasing population. These factors can contribute to better-performing properties, higher tenant retention rates, and a resilient real estate market.