Northwest Arkansas Business Journal - NWABusinessJournal.com

Developers Jockeying for Position

by Paul Gatling

Enrollment at the University of Arkansas has increased dramatically in recent years.

Last fall, Chancellor G. David Gearhart announced there were 23,199 students at the state’s flagship university. That represented a 17 percent increase from an enrollment of 19,849 in the fall 2009 semester.

The enrollment figures among freshmen were even more significant with 4,462 students on campus, representing a 53 percent increase from the freshman class enrollment of 2,919 just two years ago.

Like bees to honey, companies that specialize in purpose-built student housing — and even a couple of firms that are taking their first shot in the market — have zeroed in on Fayetteville.

Developers from near and far have proposed four upscale housing developments in the city targeting the UA student market.

Three of them will follow the same lifecycle, with project start dates this spring or early summer and completion dates in time for the start of the fall 2013 semester.

Asset Campus Housing, based in Houston, expects to start construction on The Domain at Fayetteville in April or May. The 16.24-acre development’s address is 833 Beechwood Ave., just south of Martin Luther King Boulevard.

908 Development Group, a boutique firm in Tampa, Fla., is making its first venture into the student housing market with The Standard at Fayetteville. That 14.3-acre development is just south of Wedington Drive at the corner of West Jewel and North Salem roads.

Likewise, Springdale-based Specialized Real Estate Group will develop its first student-housing project at 555 W. Maple St., a 2.96-acre development that figures to be sought-after, given a location sandwiched between the UA and Dickson Street.

A fourth project is getting a head start on its competitors, with an eye on being completed and ready for students this fall.

Campus Crest Communities of Charlotte, N.C., will bring its “Grove” brand to Fayetteville with the The Grove at Fayetteville. The 12.5-acre development sits at the old Washington County Livestock Auction on West 11th Street, east of the Fayetteville National Cemetery. The company intends to have the complex operational and fully leased by the fall semester.

That spike in activity will represent a building boom that’s not often seen.

“I’m not sure I’ve seen that before in any other market,” said Barrett Kirk, senior vice president for development at Asset Campus Housing. “We actually started looking in this market two years ago and in that time these other deals popped up and that makes us a little worried.

“I know what we build will be popular and we have a great site, but it’s always concerning when you hear of other projects.”

Together, the four developments will add 2,493 beds — an average of about 623 at each development — to the existing apartment inventory of approximately 13,000 in Fayetteville.

That’s an increase of just less than 20 percent, a fact that makes it easy to assume the market could see some disruption.

It harkens back to the great housing boom in Northwest Arkansas, economist Kathy Deck said, when too many houses were built to chase too few buyers.

Deck, the director of the Center for Business and Economic Research at the UA, agrees the surge in student enrollment necessitates a clear need for additional off-campus student housing. But are too many developers identifying the need at once?

Deck believes dropping such a large number of beds into the existing inventory all at once will have a clear impact on the overall market.

“Inasmuch as students move, their preferences are new units versus old units,” she said. “And these projects are not just plain vanilla units.

“We know there is demand for additional units, but in the short term, we may see vacancy rates at a very unhealthy level,” Deck added. “It’s a large number of beds, particularly when you compare it to the existing stock.”

University View       

The UA mandates all freshmen students spend their first year living on campus.