Skyline Report: Vacancy Rates Dip For Northwest Arkansas Commercial, Multi-Family Real Estate

Vacancy for multifamily real estate in northwest Arkansas closed the fourth quarter at its lowest point since 2006, according to the most recent Skyline Report from Arvest Bank.

Vacancies were down to 4.3 percent to end 2012, down from 5.1 percent in the second quarter. Steady job growth and incremental population growth, particularly among University of Arkansas students, are among the reasons the rental market has tightened, according to Kathy Deck, lead researcher for the Skyline Report at the UA’s Center for Business and Economic Research at the Sam M. Walton College of Business.

"We are seeing an incredibly tight multifamily rental market with very attractive vacancy rates right now," Deck said. "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 construction on 1,947 rental units is ongoing. Another 1,047 rental units have been submitted for approval in Fayetteville, home of the UA campus. Growth is also happening on campus where 600 beds are being added with the possibility for 400 more by 2015.

Vacancy rates in Rogers are down to 2.3 percent. It’s a slight drop from 2.5 in the second quarter of 2012.

Multifamily vacancy rates in Springdale and Bentonville declined significantly. According to the report:

  • Springdale’s vacancy rate declined to 5.5 percent at the end of the fourth quarter of 2012 from the 10 percent reported at the end of the second quarter of 2012.
  • Bentonville’s vacancy rate at the end of 2012 was 2.4 percent, down from the 3.8 percent reported at the end of the second quarter of 2012.

Siloam Springs was the only area to see an increase, growing to 8.5 percent in the fourth quarter after being at 5.9 percent earlier in the year.

Deck pointed to job and population growth also having an effect on commercial real estate in the area. Vacancy rates for the last half of 2012 declined in every submarket of commercial real estate except for warehouses. That submarket rose to 20.2 percent after being at 19.9 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."

Here’s more from the Skyline Report:

  • Every submarket of the northwest Arkansas commercial real estate experienced positive net absorption of space. Only 136,425 SF of new space was added to the market, while 1.3 million SF of commercial space was absorbed, netting positive absorption of about 1.2 million SF.
  • The largest gains in absorption came in the industrial submarket with 277,529 SF and the office submarket with net positive absorption of 225,292 SF. The warehouse and retail/warehouse submarkets had positive net absorption of 198,350 SF and 121,292 SF, respectively. The office/warehouse submarket had positive net absorption of 120,801 SF, the office/retail submarket had 115,142 SF, and the retail submarket had 106,353 SF.

According the report, conversation between researchers and commercial developers/property managers reveal optimsim for the market. Among the factors for optimism: success of Crystal Bridges Museum of American Art in stimulating growth in and around Bentonville, and the planned construction of a flyover access from College Avenue to Fulbright Expressway. Developers think the flyover will spur development near the Northwest Arkansas Mall in Fayetteville.