NWA's commercial real estate is "balanced," report finds
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More than 2.1 million square feet of commercial real estate opened in Northwest Arkansas during the second half of 2023, but the overall vacancy rate dropped to slightly to 5.8%, according to the biannual commercial Arvest Skyline Report released Tuesday.
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 latest numbers in the report show the market remains "balanced and healthy."
By the numbers: The 5.8% rate combines all commercial real estate — from class A office space to warehouse — and is down from 6.4% half-way through 2024.
- The area's three largest submarkets closed the year with office space dropping from a 7.5% vacancy rate to 6.3%; warehouse from 8% to 7.6%; and retail from 6.2% to 4.9%.
The big picture: Nationwide, vacancies hit a new high in 2024, with 20.4% of office space in the country's top 50 metro areas empty, per a Moody's analysis.
Flashback: There was almost no available warehouse space to lease in late 2022 as contractors snapped it up to stage construction materials for the Walmart Home Office.
- "There was clearly demand for various types of … the big warehouse space, and also the flex warehouse space," Jeff Cooperstein, researcher with the Center for Business and Economic Research at the University of Arkansas, told Axios.
- "And we're seeing it get built, which is good, and then it's getting absorbed … at a good speed, I'd say."
Reality check: Medical office space remains tight, with a 1.9% vacancy rate.
- Yes, but: Medical office space is somewhat dependent upon larger institutions being completed — such as the Heartland Whole Health Institute and Alice L. Walton School of Medicine.
- Adjacent office space likely won't be built until the full scope of the needs are understood, Cooperstein said.
Fun fact: Hotels aren't considered leasable commercial space but are included in building permit data.
- There were 1,190 new hotel rooms in 10 new properties under construction at the end of 2024, almost doubling the number of NWA rooms over the past 15 years.
- The total number of rooms now stands at about 9,300.
What we're watching: Building permits — an indicator of commercial space being developed — fell to $195.7 million in the second half of 2024, down from $287 million a year earlier.