Commercial Real Estate Market Records Positive Net Absorption; Multifamily See Increase in Vacancy Rates, Prices
FAYETTEVILLE, Ark. (September 4, 2014) – Arvest Bank today released its Skyline Reports on commercial and multifamily real estate in Northwest Arkansas for the first six months of 2014.
Positive absorption of existing space continues to bring down vacancy rates in the commercial real estate market in Benton and Washington counties, with the largest gains coming in the submarkets of warehouse and office space. A total net absorption of 656,523 square feet was the result of 713,186 square feet becoming occupied and only 56,663 square feet being added to the commercial real estate market overall in the first six months of 2014.
Vacancy rates in the first half of 2014 decreased across all submarkets of commercial real estate except for the medical office submarket. Medical office, which vacancy rate increased to 13.5 percent in the first half of 2014, was the only subcategory that reported an increase in the vacancy rate during the second half of 2013, up to 12.8 percent from the 12.3 percent reported in the first half of 2013.
“Slow, steady improvement has been what we have observed in the commercial real estate market,” said Kathy Deck, lead researcher for the Skyline Report and director of the Center for Business and Economic Research. “The increased level of new building permit activity reflects local optimism that the absorption of the last few years has created opportunities for new development.”
From January 1 to June 30, 2014, $78.2 million in commercial building permits were issued in Northwest Arkansas. In comparison, there were $35.5 million in permits issued in the first half of 2013.
“Smart, patient growth can have a positive influence on Northwest Arkansas’ economy,” said Craig Shy, senior vice president and loan manager with Arvest Bank in Fayetteville. “That growth goes hand in hand with using what is already available in our market. A balanced approach using both new and repurposed construction should work to maintain a healthy economy.”
Panelists of Northwest Arkansas developers interviewed by CBER staff in the first half of 2014 expressed positive opinions toward the continuing creation of amenities in Benton and Washington counties, along with the increasing attention the area is getting for tourism due to Crystal Bridges Museum of American Art, the Amazeum museum for children now under construction in Bentonville and the continued expansion of the trail system throughout Northwest Arkansas.
Recent construction of rent-by-the-bed style student apartment complexes around the University of Arkansas in Fayetteville helped push the vacancy rates for multifamily real estate n Northwest Arkansas up to 6.5 percent in the first half of 2014 from the 4.0 percent reported in the first half of 2013 and the 5.8 percent reported in the second half of 2013.
With 16,194 rental units in 340 apartment complexes within Northwest Arkansas’ total of 31,802 units in 713 complexes, Fayetteville’s multifamily real estate market has the highest vacancy rate in Benton and Washington counties at 7.2 percent for the first half of 2014. That figure is up from the 5.6 percent reported in the first half of 2013 but down from the 7.7 percent reported in the second half of 2013.
“The new purpose-built student multifamily housing in Fayetteville made local vacancy rates higher, but the rest of the market continues to be quite tight in Northwest Arkansas,” said Deck, There are still opportunities for new complexes in both Benton and Washington counties and we expect to see continuing announcements of additional units in the coming months.”
The average monthly lease price for a multifamily property unit in Northwest Arkansas increased to $568.80 in the first half of 2014 from $556.71 reported in the second half of 2013. The average monthly lease rate per square foot was $0.67, up just one cent from the 0.66 reported in December 2013. The by-the-bed rental units were by far the most expensive to lease at $1.36 per square foot, followed by studio at $1.23, 1-bedroom at $0.78, 4-bedroom at $0.71, 3-bedroom at $0.63 and 2-bedroom at $0.62.
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 Center for Business and Economic Research in the Sam. M. Walton College of Business at the University of Arkansas (CBER).
In 2004, Arvest Bank entered into a contract with CBER to collect information about the local real estate markets. CBER researchers aggregated and analyzed data from local governments, property managers, visual inspections and the business media to provide a complete picture of the status of property markets in the two counties.
The Center for Business and Economic Research at the Sam M. Walton College of Business provides excellence in applied economic and business research to federal, state and local government, as well as to businesses currently operating or those that desire to operate in the state of Arkansas. The center further works to improve the economic opportunities of all Arkansans by conducting policy research in the public interest.