The current apartment market performance story is truly stellar in almost every metro across the country. But there are a handful of spots missing out on all the good news. Among the comparative laggards, Little Rock stands out as the most notably weakened market, hurting by every key metric.
Little Rock’s overall occupancy rate has been running at roughly 90% to 91% for five quarters, with the reading as of 2Q 2014 coming in at 91% even. That’s the lowest occupancy figure seen across the nation’s 100 largest local apartment markets. There is pronounced softness in the oldest class C properties, as occupancy in that segment registers at just 88% or so. Occupancy isn’t all that great for top-tier communities either, with lease-up of recent completions proving slower than the rates posted in most other metros. That leaves middle-market, class B properties as the healthiest component of the market. Occupancy right around 93% in those units certainly isn’t a disaster, but the rate does trail results posted elsewhere.
Just as Little Rock lands at the bottom of the rankings for apartment occupancy, its rent change results over the past year have been the worst. Effective rents for new leases dropped 1.2% from mid-2013 to mid-2014, with little that was encouraging seen by either product niche or neighborhood.
A struggling economy is the Little Rock apartment market’s biggest challenge. Over the past year, annual job change generally has been bouncing back and forth between losing a handful of positions and gaining a handful of jobs. The latest figure for July from the Bureau of Labor Statistics is meaningfully better – just over 5,000 jobs added for a growth rate of 1.5%. That may mean the tide has turned in the metro. On the other hand, it’s a one-month, point-in-time reading that’s significantly out of line with immediately previous results, and that certainly suggests a statistical blip.
At the same time that the economy hasn’t provided much underlying support for apartment demand, a moderate block of new supply has come on stream. About 900 units were finished between mid-2013 and mid-2014, and almost as many remain under construction.
Most labor market economists anticipate that Little Rock’s job production pace will improve mildly during the near term. That should be enough to at least stop the bleeding in the apartment market’s performance and get revenue change back into positive territory. Still, it’s hard to imagine a scenario where this one doesn’t register close to the bottom of the list for overall momentum throughout the course of the next year or so.
(Image source: Shutterstock)