Market Expansion Has Begun

Believe it or not, the commercial real estate market seems to follow a pretty predictable cycle.

Experts in the field will typically tell you the four stages of the real estate cycle are expansion, oversupply, recession and recovery. Many who were involved in the market before and during the Great Recession might argue that those cycles are better referred to as optimism, euphoria, denial and despondence.

Regardless of how you classify a real estate cycle, as a person who is involved daily in the local commercial real estate market, I am pleased to report that I, and most of my peers, feel that we are firmly in the recovery stage and on the cusp of entering the expansion phase.

I am sure that most of you who chose to take the time to read an article of this type have all had your personal experiences or opinions about the state of the commercial real estate market, some good, some not so good.

But for those who are skeptical that we are in a recovery, I believe it is helpful to try to look at the Northwest Arkansas market through a fairly broad lense.

The commercial market for our MSA consists of approximately 28 million SF of industrial space, 15 million SF of retail space and 10 million SF of office space. It is easy to form opinions based on properties of which you have specific knowledge, but it is important to understand that all of our primary categories of commercial real estate have shown very significant improvements over the past 12 months.

The third-quarter numbers published on the Xceligent Market Trends report illustrate that we have experienced four quarters of positive absorption in industrial space, and the current vacancy rate of 5.4 percent is almost a full 5 percent lower than the national vacancy rate of 9.3 percent.

Absorption over the prior three quarters in the office segment has totaled 163,104 SF, and our vacancy rate is a healthy 9.8 percent, which is almost a full six points below the national average. Retail space has also experienced healthy demand and the current vacancy rate is 6.2 percent compared to the national average of 10.6 percent.

Like many of my peers, I am extremely proud of these statistics because behind the scenes, there are thousands of individual property owners, bankers, realtors, tenants, members of city government and others who have worked in a cooperative manner to weather the storm that was the Great Recession. Northwest Arkansas certainly displayed an impressive level of resilience and I believe that strength, combined with the continuing success and expansion of many of local economic drivers, has put our market in a position to remain compelling to investors, developers, employers and manufacturers.

It is certainly a welcomed change to be entering this period of expansion and optimism, but we do need to be diligently focused on the data that the market is providing and recognize that it’s the responsibility of all of us to extend this phase of the market cycle as long as possible through responsible development, investment and decision making. Here’s to the beginning of what I believe to be an exciting phase of the Northwest Arkansas commercial real estate market.

Clinton Bennett, CCIM is the principal broker of CBRE|Northwest Arkansas. He can be reached at 479-301-2520.