The overall vacancy rate for commercial real estate remains at a historic low in northwest Arkansas, according to Arvest Bank's Skyline Report for the second half of 2017.
The vacancy rate declined to 9.7 percent in the second half of 2017 from 10 percent in the first half of 2017, which had been the lowest rate recorded since the report's inception in 2004.
In all, 718,282 SF of new commercial space was added to the market, which absorbed 990,860 SF. The result is positive net absorption of 272,578 SF, the report said.
The warehouse submarket added 599,600 SF and absorbed 713,092 SF, resulting in positive net absorption of 113,492 SF and a decline in the vacancy rate to 5.8 percent from 7.6 percent in the first half of last year.
The amount of available square feet has also declined over the course of several years, from 1.2 million SF in the second half of 2013 to 534,307 in the second half of 2017.
The vacancy rate for office space fell too, from 10.4 percent in the first half of 2017 to 9.1 percent in the second half. The amount of office space available for rent fell from 1.5 million SF in the second half of 2013 to 1.1 million SF in the second half of 2017.
"Seeing strength in Class B office space rentals is a good sign for the overall economy as it indicates many newer companies and startups are stepping into Class B space as their counterparts from a few years ago are moving up and into Class A space," Mervin Jebaraj, lead researcher for the Skyline Report, said in a news release. "I believe the entrepreneurial programs in the region are going to need the vibrant Class B office market."
Jebaraj is the director of the Center for Business & Economic Research at the University of Arkansas' Sam M. Walton College of Business in Fayetteville.
The retail submarket saw a slight increase in vacancy rates. The rate was 8.9 percent in the second half of last year, up from 8.7 percent in the first half.
Since the second half of 2013, the amount of available retail space has increased from 724,361 SF to 871,707 SF in the second half of 2017.
"While the vacancy rate for retail space has increased, it is still relatively stable as many service industry companies like restaurants have taken over what was previously retailer selling goods," Jebaraj said. "As more large-scale sellers of goods like Toys "R" Us continue to close stores, we will likely see vacancies increase since these larger, big box spaces are harder to repurpose for service industries."
During the second half of 2017 there was an increase in commercial building permits to $204.1 million from $116.8 million in the first half of the year.
Vacancy rates in multifamily real estate rose slightly, to 4.5 percent in the second half of last year from 4.2 percent in the first half. Jebaraj said that the small increase was primarily the result of a few large properties coming online late in the year in Bentonville and Fayetteville.
Jebaraj also said a vacancy rate of under 5 percent is healthy and that he believed that market could absorb the new units being built or planning. The population is expected to grow and the lot supply and inventory of new homes are shrinking, Jebaraj noted.