"Tech Hub" is a common term employers and city officials like to throw around for attention. However, Northwest Arkansas is the last region you'd expect to be labeled as a Tech Hub. The region spans Bentonville to Fayetteville and expects to add 1,700 new tech jobs in the next five years. In addition, there are significant critical drivers in the area due to legendary hometown entrepreneurs such as Sam Walton, J.B. Hunt, and Don Tyson building some of the world's largest companies, including Walmart, Sam's Club, J.B. Hunt Transport Services, and Tyson Foods. In this Re:Cap, the team at Rockval interviews Wesley Fikes, a Bentonville local, unpacking the ripple effects Walmart has had on the region. Wesley is the Broker of North Forty Realty, a data enthusiast, and an investor in single-family and multifamily properties.
In 1971, Walmart relocated to Bentonville, Arkansas, to have a centralized location for distribution across the United States. Tyson Foods similarly began putting down roots, taking advantage of the hub and spoke geography the city provides.
The presence of the retail goliath has attracted many of its significant suppliers, including Proctor & Gamble, Hershey, Clorox, and Rubbermaid, to name a few. By 2023, Tyson Foods expects to bring 1,000 corporate jobs back to Bentonville. According to Fikes', "11 of the 18 fastest growing companies in the state are located in NW Arkansas".
SO... business is booming in Northwest Arkansas and the real estate surrounding it?
As you would expect, this has led to a prospering commercial and residential real estate market. The multifamily vacancy rate is virtually nonexistent at less than 2%. According to the Commercial Skyline Report, there was a recorded low vacancy rate for commercial assets even though the market added 521,750 SF of commercial space in the first half of 2022. As a matter of fact, the vacancy rate declined from 8.3% to 5.8%, and industrial assets vacancy fell to a nonexistent 0.8%. New development in multifamily, industrial, and commercial properties has been growing steadily.
According to Fikes, multifamily rents have been steadily on the rise. Even though rents are increasing, Fikes states that housing is still relatively affordable, "You can purchase new construction for $190 to $220/SF, re-sale homes for $170/SF, and around $ 140 SF for fixer-uppers in peripheral markets." The median household income of $84,000 currently supports the rising home prices., an asset management firm, currently manages 233 single-family homes in the Northwest region and is planning to expand its position. They have just launched a $100 million fund to purchase additional single-family assets in Bentonville and Washington Counties. As the median income increases with tech companies migrating to the rapidly growing market, the support for these values will continue to increase. Moreover, as rooftops drive retail, the current environment for retail tenants and landlords is also quite healthy.
The continuing legacy
The Walton family continues to invest money into the local economy. They have supported the community by creating a world-class mountain bike trail system, Crystal Bridges Art Museum, new medical centers, and support to local colleges. To give some context on the growth, Fikes mentions that a new school has been brought online every year since 2005, totaling 61 schools in Benton County. The region is expected to double in size over the next ten years.
Rockval Key Takeaway
If you have yet to consider investing in Arkansas, now might be a good time before word spreads. Fikes is adamant about the long-term fundamentals for real estate in the Bentonville - Fayetteville markets, supported by substantial economic drivers from large corporations and ever-improving demographics. A diverse market like this can withstand economic downturns but still holds a growth factor. So keep this region on your watchlist.
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