Report: Northwest Arkansas' office space still in high demand
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Office vacancy rates in Northwest Arkansas fell to a 15-year low of 4%, while the national rate edged to a record 20.7% in Q2, according to a Cushman & Wakefield Sage Partners analysis.
Why it matters: Commercial property is an indicator of an area's economic vitality. Low vacancy rates often signal strong economic demand but can drive up rents and limit space for businesses.
The big picture: National office vacancy rates have mostly increased in the past decade and have hovered around the 20% mark since last July. The rates have largely decreased in Northwest Arkansas during the same period.
- "We are now seeing all kinds of businesses move into the area because of the population growth, because of the job opportunities and because of the economy and the pro-growth strategies we have," Tom Allen, president of Sage Partners, told Axios.
- He's not always leased to law offices and CPA firms, Allen said. "Now we're a true market, a true MSA that has all kinds of businesses that really don't do anything with Walmart."
State of play: In its Northwest Arkansas market summary, Sage Partners of Rogers, one of the largest commercial brokers in NWA, compares a few key trends between the region and the U.S.
- The company is set to publish its NWA-specific summary Tuesday.
By the numbers: Along with vacancies, the analysis notes an estimated average price per square foot being paid in the market.
Office — Combined office space leases averaged $25.50 per square foot, compared with a national rate of about $38.
- Yes, but: Lauren Blass, brokerage associate with Sage, said most of the leases she's done lately are in the $33-$37 per square foot range.
Industrial — Warehouse space was near zero in 2022, but all industrial is now at about 6% due to more than 500,000 square feet being vacated during the second quarter.
- Sage forecasts the vacancy rate will shrink in the next year.
Retail — Retail space is at an unusually low 3.39% vacancy rate and leasing for about $19.31 per square foot.
- "You're talking about a historically low vacancy rate … low 3% is too low," Sage CEO Marshall Saviers said. "What the market is saying is: 'We need more neighborhood retail. We need more retail that's walkable, bikeable, etc., etc., etc.'"
- With developments such as the Whole Foods and Ruth's Chris in Rogers nearing completion, the retail vacancy rate is forecast to increase in the next year.
Multifamily — The vacancy rate is 8% for multifamily housing, roughly in line with the national average.
- Prices for single-family homes have skyrocketed in recent years, according to the Arvest Skyline Report and a recent Walton Family Foundation study.
- "I expect that [vacancy rate] to go down as less is being delivered and more folks have to rent," Saviers said.
The bottom line: "It's the biggest issue of our region," Saviers said about infrastructure. "It's the one thing that could hold us back if we're not super intentional about it."