NWA Retail Space Looks Poised for Rebound

by Serenah McKay  on Monday, Jul. 4, 2011 12:00 am  

After nearly two years of foundering in a mucky economy, northwest Arkansas' stalled retail rental market is finally gaining traction, area brokers say.

But the absorption of vacant space is coming from some surprising quarters and is requiring both landlords and tenants to tap their creativity and make a few concessions.

In early 2009, total vacant retail space in Benton and Washington counties reached 1 million SF, a gloomy milestone few foresaw during the building frenzy a few years earlier. A commercial real estate survey reported a retail vacancy rate of 14.6 percent in the second quarter of 2009.

The market has languished near that level for nearly two years, even with construction at a virtual standstill. Yet brokers such as Clinton Bennett, a managing partner with Grubb & Ellis-Solomon Partners, say improvement has been slow but steady and is gaining momentum.

"Since June 2009, we've seen a consistent absorption of space," Bennett said. "It hasn't happened as quickly as we'd like. But I think we're getting closer to an equilibrium where it's going to be a healthier real estate market."

Steve Lane, managing director with Colliers International's Bentonville office, described how the seemingly insatiable demand for retail space seen in 2007 morphed into a bloated market.

"The way we look at it, 2008 is when the wheels started to come off, and in 2009, we basically could have all gone fishing," he said.

Toward the end of that year, though, retailers started cautiously moving forward again with expansion plans.

"And so for the last half of last year and the first half of this year, we've been quite busy," Lane said.

Small Steps Forward
The University of Arkansas' Center for Business & Economic Research surveys the residential, commercial and multifamily real estate markets in Benton and Washington counties. Arvest Bank Group of Fayetteville commissions the survey, called the Skyline Report.

A portion of the report is released to the public, quarterly for the residential survey and every six months for the commercial and multifamily surveys.

The latest commercial Skyline Report, released March 1 and covering June-November 2010, showed 80,898 SF became occupied in the retail submarket, netting positive absorption of 63,299 SF.

The retail vacancy rate rose to 14.3 percent from 13.6 percent in the previous six months, an increase attributed to "the repurposing of former owner-occupied space," mainly the consolidation of Hank's Fine Furniture from two stores in Fayetteville and Bentonville into a new showroom in Rogers.



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