FAYETTEVILLE, Ark. (KNWA/KFTA) — In the second half of 2021, the overall vacancy rate for commercial real estate properties in Northwest Arkansas dropped to 8.3%—its lowest level since the inception of the Skyline Report.
According to a press release from Arvest Bank, this was down from 8.9% in the first half of 2021, which was the lowest on record at the time. During this period, 636,552 square feet of new, leasable commercial space was added to the market while 862,106 square feet was absorbed, resulting in positive net absorption of 225,554 square feet.
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. 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.Gene Gates, Senior Vice President and Commercial Loan Manager with Arvest Bank of Fayetteville
The most significant changes occurred in the warehouse submarket, where the vacancy rate fell from 6.6% in the first half of the year to 5.3% in the second half. While 445,365 square feet of warehouse space was added, 578,544 of space was absorbed, leading to positive net absorption of 133,179 square feet.
Mervin Jebaraj, CBER director and the lead researcher for the Skyline Report, said, “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. To see the vacancy rate well under 10% indicates a healthy sector.”
In the office submarket, the vacancy rate fell from 11.2% in the first half of 2021 to 10.0% in the second half as 116,280 square feet of space was added and 235,032 was absorbed, resulting in positive net absorption of 118,752 square feet. All the new space added was in the medical office category.
Commenting on the office submarket, Jebaraj said, “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. What the data is showing in the Northwest Arkansas office market is that this submarket remains strong and balanced.”
The other major category is the retail submarket, which demonstrated strength as a relatively small amount of new space, only 25,720 square feet, was added to the market and 127,304 square feet of space was absorbed, leading to positive net absorption of 101,584 square feet.
Commercial building permit data over the past twelve months has also 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.