Vacancy Rates Dip In Multifamily and Commercial Markets

Northwest Arkansas’ multifamily vacancy rate is the lowest since 2006, and the area enjoyed positive absorption of more than 1 million SF of commercial space in the second half of 2012.

Those are the highlights of the latest Skyline Report, portions of which were issued today by Arvest Bank. The bi-annual analysis of commercial, single-family residential and multifamily residential markets in Benton and Washington counties is conducted by the Center for Business and Economic Research in the Sam. M. Walton College of Business at the University of Arkansas.

The area’s multifamily vacancy rate at the end of the fourth quarter of 2012 was 4.3 percent, down from 6.1 percent at the same time in 2011.

“We are seeing an incredibly tight multifamily rental market with very attractive vacancy rates right now,” CBER lead researcher Kathy Deck said in a news release. “That kind of market might tempt developers to start building more apartment complexes but, in the Fayetteville market in particular, that attractive vacancy rate is not going to last long.”

New projects with 1,947 rental units currently are under construction, and projects with another 1,047 rental units are submitted for approval in Fayetteville, adding substantially to the city’s base of 13,993 units. The UA also is adding nearly 600 beds, and is considering projects that could add another 400 beds as early as 2015.

Still, among cities in Benton and Washington counties, only Siloam Springs reported an increase in the multifamily vacancy rate, from 5.9 percent to 8.5 percent.

Job and population growth are having similar effects, meanwhile, on the commercial real estate market, Deck said. Vacancy rates in the last half of 2012 decreased in all submarkets of commercial real estate except for the warehouse submarket, which rose from 19.9 percent to 20.2 percent.

“While I cannot understate the progress we are making in the commercial real estate market, we will continue to see more projects developed as ‘build-to-suit’ rather than speculative building,” Deck said. “And that is only prudent, considering that, by and large, we are still seeing elevated vacancy rates across the market.”

Every submarket of Northwest Arkansas commercial real estate experienced positive net absorption of space. Only 136,425 SF feet of new space was added to the market, while about 1.3 million SF was absorbed.

“Developers and builders are doing their homework and moving forward with well-reasoned projects that fill a particular need within our market,” Kent Williamson, an Arvest loan manager in Springdale, said in the release. “Everyone, including the banking industry, is taking a thoughtful approach to projects that contribute to the further economic prosperity of Northwest Arkansas.”