Arvest Bank recently released Skyline Reports on commercial real estate in Northwest Arkansas for the first half of 2021.
During the first half of 2021, the overall vacancy rate for commercial real estate dropped to 8.9% as 1,153,353 square feet of space was absorbed. Combined with 246,735 square feet of new space being added, the market saw net positive absorption of 906,618 square feet, which was the largest amount of net positive absorption in almost a decade.
The vacancy rate for commercial real estate for both the first and second halves of 2020 had been 10.8%, and this is the first report since the second half of 2017 where the vacancy rate has been below 10%.
More than half of the total net positive absorption came from the warehouse submarket where 558,572 square feet of space was absorbed, while no new properties were added. The vacancy rate in this submarket fell from 9.3% at the end of 2020 to 6.6% .
The office submarket absorbed only 1,052 square feet of space from January through June and with 165,424 new square feet of space being added to the market, the vacancy rate rose from 10.8% in the second half of 2020 to 11.2%.
“The office market is dealing with pandemic-related factors as companies in the region adjust their office space to accommodate more employees working remotely,” 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 the lead researcher for the Skyline Report. “From our discussions with area developers and property managers, we know this includes companies consolidating what were multiple leases or locations. We feel that this is a temporary situation and should have no long-term negative impact, as the need for office space continues to be strong as the region continues to grow.”
The retail submarket demonstrated continued strength as the overall vacancy rate for retail space remained 10.8% at the end of the first half of 2021, the same as the second half of 2020.
Commercial building permits soared in the current reporting period with more than $647 million in permits issued, but approximately $435 million of that total was associated with Walmart’s new headquarters project. This still left approximately $212 million in other commercial building permits being issued, which was an increase from $189 million in the second half of last year.
“What is evident from this report is that the commercial real estate market in Northwest Arkansas continues to expand and, generally speaking, demand continues to keep pace with the growth,” Kelly Carlson, commercial loan manager with Arvest Bank of Benton County said. “Our commercial lending teams across the region are working with developers to bring intelligent growth projects to fruition.”
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 CBER.
In 2004, Arvest Bank contracted 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.
CBER 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.