The commercial vacancy rate in Northwest Arkansas fell to 5.8% in the first half of 2022, from 8.3% in the second half of 2021, according to a new report on commercial real estate. Over the same period, the warehouse vacancy rate fell to 0.8%, from 5.3%.
On Tuesday (Oct. 4), Fayetteville-chartered Arvest Bank released The Skyline Report for commercial real estate in Washington and Benton counties for the first half of 2022. Research for the biannual report is completed by the Center for Business and Economic Research (CBER) in the Sam M. Walton College of Business at the University of Arkansas.
For a PDF of the report highlights, click here.
According to a news release, the commercial vacancy rate is down from 8.9% in the first half of 2021, which was the first time it had fallen below 10% since the second half of 2017.
The rate fell despite 521,750 new square feet of leasable commercial space being added to the market in the first half of 2022 — more than twice the amount added in the first half of 2021, the release shows. During the first half of 2022, more than 1.75 million square feet of space was leased.
The warehouse and retail/warehouse submarkets had the highest decreases in vacancy rate. While it was less than 1% in the warehouse submarket, all submarkets had vacancy rates lower than 10%. The only submarket with a higher vacancy rate this year was the medical office market, which rose to 6.6%, from 4.3% last year.
“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,” said CBER Director Mervin Jebaraj. “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 e-commerce growth is requiring more and more warehouse space. A vacancy rate of less than 1% for warehouse space means there is virtually no leasable warehouse space in the region.”
According to the news release, the retail submarket “continues to defy national trends, with retail vacancy rates dropping below 10% for the first time in several reports.”
The total value of commercial building permits issued in the first half of 2022 was $293.7 million, down from $397.9 million in the second half of 2021 and from $647.1 million in the first half of 2021. Most of the building permits in the first half of 2022 were issued in Bentonville, which accounted for 64.5% of the total value of permits issued. Springdale accounted for 18%, Rogers had 9.9% and Fayetteville had 3.7%.
“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.”