Commercial vacancy falls to 5.6% in Northwest Arkansas

According to a new real estate report, commercial vacancy in Northwest Arkansas has declined to the lowest rate since at least 2005. Meanwhile, the issued value of commercial building permits, excluding Walmart’s new Bentonville headquarters project, hit the highest level since the second half of 2005.

Fayetteville-chartered Arvest Bank released Tuesday (April 4) the Skyline Report for commercial real estate in Northwest Arkansas for the second half of 2022 that shows the vacancy rate declined by 0.2 percentage points to 5.6% from the first half of the year. Arvest Bank sponsors the biannual reports that are completed by the Center for Business and Economic Research in the Sam M. Walton College of Business at the University of Arkansas.

For a PDF of the report, click here.

This is the third consecutive report in which the rate declined to a new low, following 5.8% in the first half of 2022 and 8.3% in the second half of 2021. The market added 383,628 square feet of new space, while 446,405 square feet of space was absorbed, resulting in a net positive absorption of 63,777 square feet.

“The commercial real estate market in Northwest Arkansas is extremely healthy right now,” said CBER Director Mervin Jebaraj. “To have the lowest vacancy rate since we began tracking this data in 2005 despite the emergence of remote and hybrid work options is a testament to the market’s performance. The commercial market never really took any long-term hits from the pandemic, which is something almost no other market in the U.S. can say.”

The office and office/retail submarkets showed strength in the second half of 2022. The office submarket vacancy rate fell to 8.4% from 10% in the same period in 2021 and 9.1% in the first half of 2022. The office/retail submarket vacancy rate declined to 5% from 8.7% in the same period in 2021 and 7.3% in the first half of 2022. The warehouse vacancy rate of 1.6% indicated a lack of warehouse space in the region that’s available for lease, according to the report. The rate is up from 0.8% in the first half of 2022 but down from 5.3% in the second half of 2021.

The report shows that, like at this time last year, building permit data over the past several reports have been skewed by permits issued for Walmart’s new headquarters project. Excluding the project, the total value of commercial building permits was $218 million, the highest total for non-Walmart permits since the second half of 2005.

Total permits issued for commercial projects was $240.9 million in the second half of 2022, down from $293.7 million in the first half of the year.

“It is obvious from the historically low vacancy rate in NWA commercial properties that there are opportunities for commercial real estate developers to intelligently take on new projects,” said Gene Gates, loan manager with Arkansas Bank of Fayetteville. “At Arvest, we are working closely with our development customers to meet the region’s need for office and warehouse space.”