NORTHWEST ARKANSAS (KNWA/KFTA) — According to the Skyline Report released by Arvest Bank, the overall vacancy rate for commercial property in Benton and Washington Counties fell notably over the first half of 2022, compared to the same period in 2021.
The report states that the rate fell from 8.9% to 5.8%. The drop is significant because last year was the first time that the rate had fallen below 10% since the second half of 2017.
The vacancy rate also fell despite over half a million square feet of new leasable space entering the market during the period. The amount of new commercial space added was 521,750 square feet—more than twice the amount of new space added in the first half of 2021.
With 1,756,640 square feet of positive absorption, this resulted in net positive absorption of 1,234,890 square feet. Looking at year-over-year numbers, vacancy declined in six out of seven commercial submarkets, with only medical offices seeing an increase.
The vacancy in the warehouse sector fell below 1%, and all submarkets have vacancy rates lower than 10%.
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. 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.Mervin Jebaraj, CBER director and lead researcher for the Skyline Report
The report notes that there were $293.7 million in commercial building permits issued in the first half of 2022, down from $397.9 million in the second half of 2021. The majority of those were issued in Bentonville, which accounted for 64.5% of the total. Springdale accounted for 18%, Rogers had 9.9%, and Fayetteville had 3.7% of the total building permit value.
“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 Bank 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.”
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.