The commercial real estate market in Northwest Arkansas remained “strong, balanced and healthy” amid a flat vacancy rate in 2020, according to a new real estate report. The overall vacancy rate was unchanged at 10.8% throughout 2020 but up from 10% in the second half of 2019.
Fayetteville-chartered Arvest Bank released Tuesday (April 26) the Skyline Report on commercial real estate in Northwest Arkansas for the second half of 2020. It shows 495,676 square feet of new space entered the market, while 444,103 square feet of space was absorbed, leading to net negative absorption of 51,573 square feet. The University of Arkansas Center for Business and Economic Research (CBER) completes the biannual Skyline Report.
The office space submarket added 325,188 square feet, the most in 14 years, according to the report. The market absorbed 312,494 square feet in the second half of 2020, leading to net negative absorption of 12,694 square feet. The office space vacancy rate rose by 0.2 percentage points to 10% in the second half of 2020, from 9.8% in the first half of the year. The vacancy rate is up from 8.5% in the second half of 2019. Over the past five years, more than 1.67 million square feet of office space has been added to the market. The office vacancy rate was 12.9% five years ago.
The retail submarket added 87,735 square feet of new space in the second half of 2020, while 40,068 of space was absorbed, leading to negative net absorption of 47,667 square feet. The retail vacancy rate increased from 10.6% in the first half of 2020, to 11.4% in the second half of the year.
The warehouse submarket had no new space added in the second half of 2020 and overall negative absorption of 126,895 square feet. The warehouse vacancy rate rose from 8.3% to 9.3%.
The office/retail submarket added 24,288 square feet in the second half of 2020 while absorbing 24,760 square feet, leading to net positive absorption of 472 square feet. The office/retail vacancy rate fell to 10.9% in the second half of 2020, from 11.6% in the first half of the year.
“At this time last year, there was some uncertainty as to how the commercial real estate market in Northwest Arkansas would hold up during the pandemic,” CBER Director Mervin Jebaraj said. “Through the end of 2020, demand for commercial space has remained strong. To see so much new office space added and the office vacancy rate to remain at such a healthy level indicates that, so far at least, the market remains strong, balanced and healthy.”
Commercial building permit values for the period fell by 3.7% to $188.8 million, from $196.2 million in the first half of 2020. The total value of building permits rose by 5.7% to $385 million in 2020, from $363.9 million in 2019. This was the highest one-year total since the Skyline Report was started in 2004.
“Commercial real estate in Northwest Arkansas has, to date, been able to remain strong throughout the last year,” said Kelly Carlson, senior vice president/commercial loan manager with Arvest Bank Benton County. “Our commercial lending teams across the region continue to help developers find opportunities for intelligent developments. We are all fortunate to be in an area that has weathered a full year of unprecedented change and challenges.”