Skyline Report: NWA commercial real estate demand remained strong in second half of 2025

Demand for commercial real estate in Northwest Arkansas remained strong in the back half of 2025, according to a new Skyline Report released Tuesday (March 24).

The latest Arvest Skyline Report on commercial real estate in Northwest Arkansas for the second half of 2025 detailed a 6.3% vacancy rate – lower than the first half of the year – despite 400,000 square feet of new commercial space entering the market.

Fayetteville-chartered Arvest Bank released the Skyline Reports on the Northwest Arkansas commercial real estate market along with last week’s residential and multifamily real estate analysis for the second half of 2025. The reports are completed by researchers at the Center for Business and Economic Research (CBER) at the Sam M. Walton College of Business at the University of Arkansas.

The overall vacancy rate in the market for commercial real estate was 6.3% during the second half of the year, down from 7.2% in the first half of 2025. The vacancy rate was higher than 5.8% from the second half of 2024 and slightly lower than the 6.4% rate in the second half of 2023. There was net positive absorption of 615,998 square feet, indicating strong demand for commercial space across the region.

“The market for commercial real estate in the region is extremely stable with only slight movements between reports,” said Mervin Jebaraj, director of the Center for Business and Economic Research (CBER) at the Sam M. Walton School of Business at the University of Arkansas and the lead researcher for the Skyline Report. “In the second half of 2025, we saw almost 400,000 square feet of new commercial space and over 50,000 square feet of previously owner-occupied space enter the leasing market across all submarkets, while the overall vacancy rate dropped, a clear sign of strong demand.”

The three largest submarkets, which make up 72.5% of all commercial space in the region, are office (27.2%), warehouse (24.4%), and retail (20.9%).

In the office space submarket, 123,565 square feet of space was added in the second half of 2025 — 64,897 square feet from new construction and 58,668 square feet from previously owner-occupied office space. The 7.5% vacancy rate for office space increased from 6.8% in the first half of 2025 but decreased from 8.8% two years ago in the second half of 2023.

The retail submarket vacancy rate dropped from 6.6% in the first half of 2025 to 6% in the second half. Two years earlier, in the second half of 2023, the rate was 7.9%. This submarket experienced positive net absorption of 69,761 square feet as 173,430 square feet of new space entered the market.

In the warehouse submarket, the vacancy rate was 6.1% in the second half of 2025, down from 10.4% in the first half of 2025 and up from 3.2% in the second half of 2023. There was net positive absorption of 597,962 square feet as 49,200 square feet of new warehouse space entered the market.

Building permits fell to $140.4 million, the lowest amount since the first half of 2017.

Jebaraj said the decline in permits should have an impact on the construction labor force in the region, which has been strained to keep up with demand.

“We are expecting a slight lull in new commercial construction in the months ahead, which should create some available capacity for construction for the first time in quite a while,” Jebaraj said.

Chris Thornton, executive vice president and loan manager with Arvest Bank in Springdale, said the bank’s commercial real estate development customers have done “an excellent job in seeing specific needs for future space in the region and then working to meet those needs.”

“It’s exciting and very rewarding to be able to help them get the financing they need to make these projects a reality, and our lending teams across the region are ready to work with them on future opportunities,” Thornton said.

The Arvest Skyline Report is a biannual review of the latest commercial, single-family residential, and multifamily residential property markets in Benton and Washington counties. The report is sponsored by Arvest Bank and conducted by CBER.

Last week, the Skyline Report released data and analysis related to the residential and multifamily housing market. It showed the number of homes sold in Northwest Arkansas fell by 3.5% to 5,153 as multifamily vacancy rose by 2.5 percentage points to 5.8% in the second half of 2025 from the same period in 2024.

Link here for the latest commercial real estate report. Link here for the residential report. Link here for the multifamily report.