The commercial vacancy rate in Northwest Arkansas fell to 8.3% in the second half of 2021 amid strong demand for warehouse space, according to a new real estate report. Walmart’s new Bentonville headquarters comprised nearly 70% of the more than $1 billion in commercial building permits issued in 2021.
Fayetteville-chartered Arvest Bank released Tuesday (April 5) the Skyline Report on commercial real estate in Northwest Arkansas for the second half of 2021 that shows the lowest overall commercial vacancy rate since the inception of the report. The Center for Business and Economic Research (CBER) in the Sam M. Walton College of Business at the University of Arkansas has completed the reports since 2004. Arvest Bank is the sponsor. In March, the bank released the Skyline Reports on residential and multifamily real estate for the second half of 2021.
According to the new report, the commercial vacancy rate was down from 8.9% in the first half of 2021. The commercial market added 636,552 square feet, while 862,106 square feet of space was absorbed, resulting in positive net absorption of 225,554 square feet in the second half of 2021.
All major categories of the commercial market showed strength, especially the warehouse sector, according to the report. The sector added 445,365 square feet of new space, while 578,544 square feet were absorbed, resulting in positive net absorption of 133,179 square feet. All of the added warehouse space was in Bentonville. The warehouse vacancy rate fell to 5.3% in the second half of 2021, from a peak of 10.3% in the first half of 2019. The rate also was down from 6.6% in the first half of 2021.
“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,” CBER Director Mervin Jebaraj said. “To see the vacancy rate well under 10% indicates a healthy sector.”
The office vacancy rate was 10%. The office sector added 116,280 square feet, while 235,032 were absorbed, resulting in positive net absorption of 118,752 square feet. All of the added office space was for medical offices.
“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,” Jebaraj said. “What the data is showing in the Northwest Arkansas office market is that this submarket remains strong and balanced.”
Like in the Skyline Report for the first half of 2021, Walmart’s new Bentonville headquarters continued to account for a large portion of the commercial building permits that were issued in Northwest Arkansas.
In 2021, the value of the permits issued exceeded $1.04 billion, with $724.9 million, or 69.4% of the total value, attributed to Walmart facilities, primarily the company’s new headquarters. In the second half of 2021, $272.2 million of the total $379.9 million in commercial permits issued could be attributed to Walmart projects, according to the Skyline Report.