Arvest Bank recently released its Skyline Report covering the commercial real estate market in Northwest Arkansas for the second half of 2021.
During the second half of 2021, the overall vacancy rate for commercial real estate dropped to 8.3%, the lowest overall vacancy rate since the inception of the Skyline Report. There was 636,552 square feet of space added to the market and 862,106 square feet of space absorbed, resulting in positive net absorption of 225,554 square feet.
All major categories of commercial space demonstrated strength, led by the warehouse sector where 445,365 square feet of new space entered the market and 578,544 square feet were absorbed, resulting in positive net absorption of 133,179 square feet. The vacancy rate for warehouse space was 5.3%, which is almost half the peak of 10.3% in the first half of 2019.
“The warehouse sector in Northwest Arkansas seems to be benefiting from the continued growth in e-commerce as almost 2 million square feet of new space has been added over the past five years, while still maintaining low vacancy,” said Mervin Jebaraj, director of the Center for Economic and Business Research (CBER) at the Sam M. Walton College of Business at the University of Arkansas and lead researcher for the Skyline Report. “To see the vacancy rate well under 10% indicates a healthy sector.”
The office sector had a relatively small amount of new space added, 116,280 square feet, while 235,032 were absorbed, resulting in positive net absorption of 118,752 square feet. While the amount of new space added was relatively small for the overall office sector, all the space added was for medical office space, a smaller submarket. The vacancy rate for office space was 10.0%.
“Since the onset of the pandemic there has been a great deal of uncertainty regarding the office space market as businesses have been adjusting to the realities of a more remote workforce,” Jebaraj said. “What the data is showing in the Northwest Arkansas office market is that this submarket remains strong and balanced.”
Commercial building permit data over the past 12 months has been historically high, with more than $1 billion in permits issued, but 69.4% of that total is permits issued for Walmart facilities, primarily the company’s new campus development.
“This report indicates that commercial real estate developers in the region are doing a nice job of developing the right kind of space in the right places,” said Gene Gates, senior vice president and commercial loan manager for Arvest in Fayetteville. “I know our commercial lending group is working closely with Arvest clients to provide the capital needed for the region to continue intelligent development that will meet the growing needs as Northwest Arkansas continues to grow and expand.”
The Arvest Skyline Report is a biannual analysis of the latest commercial, single-family residential and multifamily residential property markets in Benton and Washington counties. The report is sponsored by Arvest Bank and conducted by the CBER.