Arvest Bank recently released Skyline Reports on commercial real estate in Northwest Arkansas for the first half of 2022.
In the first half of 2022, the overall vacancy rate for commercial real estate was 5.8%, down from 8.9% from the first half of 2021. This drop is especially significant considering the 8.9% vacancy rate of a year ago was the first time it had fallen below 10% since the second half of 2017.
And the vacancy rate is falling despite 521,750 new square feet of leasable commercial space entering the market during the period – more than twice the amount added in the first half of 2021. During the first half of this year, 1,756,640 square feet of space was leased.
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 and conducted by the University of Arkansas’ Center for Business and Economic Research.
The report breaks commercial space into seven primary submarkets and six of those seven saw decreases in vacancy rates, led by the warehouse and retail/warehouse submarkets. Notably, the vacancy rate in the warehouse submarket is now less than 1.0%, and all submarkets have vacancy rates lower than 10%. The only submarket with a higher year-over-year vacancy rate is the medical office market, which rose from 4.3% to 6.6%.
“This report shows strong resiliency and strength coming out of the pandemic and indicates that Northwest Arkansas companies across many business sectors are experiencing continued growth,” said Mervin Jebaraj, CBER director and the lead researcher for the Skyline Report said. “This report shows that employees are returning to working from their offices and that new office space is being absorbed as a result of continued growth in the region.
“This report also continues to support the idea we have discussed previously that ecommerce growth is requiring more and more warehouse space. A vacancy rate of less than one percent for warehouse space means there is virtually no leasable warehouse space in the region.”
But even with ecommerce demanding more warehouse space, the retail submarket continues to defy national trends, with retail vacancy rates dropping below 10% for the first time in several reports.
The total value of commercial building permits issued in the first half of 2022 was $293.7 million, which was down from $397.9 million in the second half of 2021 and from $647.1 million in the first half of 2021.
“This report on commercial real estate in the region is very positive about our continued growth and it certainly demonstrates to our commercial development customers that opportunities for future development abound,” said Chris Thornton, executive vice president and commercial loan manager with Arvest in Springdale.” When you think back to the beginning of the pandemic and the uncertainties it created for commercial real estate, it is good to see the market in Northwest Arkansas remain strong.”