Northwest Arkansas commercial real estate remains balanced
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More than 600,000 square feet of commercial real estate opened in Northwest Arkansas during the second half of 2023, but the overall vacancy rate held steady at 6.4%.
- The numbers, from the biannual commercial "Arvest Skyline Report" released Tuesday, show the market remains "healthy."
Why it matters: Commercial property is an indicator of an area's economic vitality. Vacancy rates in the single digits are generally good for developers but can drive up rent and make desirable space harder to find.
The big picture: National office vacancies hit an all-time high of 19.6% at the end of 2023, due in part to hybrid/remote work arrangements.
- Yes, but: The vacancy rate at U.S. shopping centers — essentially, any retail space outside malls — fell to 5.3% at the end of September, its lowest since 2007.
Zoom in: NWA's overall commercial vacancy rate of 6.4% combines all commercial real estate — from class A office space to warehouses — and was the same last June 30.
By the numbers: The office (8.8%) and retail (7.9%) submarket rates also were the same as the first half of 2023.
- The office rate is notable since more than 200,000 square feet were added during the last six months of the year. More than 1.2 million square feet of office space were available at the beginning of 2024.
The intrigue: About 575,000 square feet of warehouse space was added during the last half of 2023, but the vacancy rate nudged down from 3.6% to 3.2%.
Between the lines: Much of the warehouse space in NWA is being used for e-commerce and as storage for ongoing work at the Walmart headquarters under construction in Bentonville, real estate agents have told Axios in the past.
- Effectively, no warehouse space in NWA was available in mid-2022.
What they're saying: "Commercial real estate in the region remains very healthy," Mervin Jebaraj, director of the Center for Business and Economic Research at the University of Arkansas, said in a news release.
- "We continue to see new space enter the market and get leased fairly quickly."
What we're watching: Commercial building permits — an indicator of optimism in the market — totaled nearly $287.1 million during the second half of 2023, a record high since the Skyline Report was first published in 2004.
- Those permit values do not include ongoing construction of the Walmart headquarters.