In northwest Arkansas, the commercial real estate market's vacancy rate for the first half of 2018 increased to 10.8 percent, up from 9.7 percent in the second half of 2017.
During the first half of 2018, according to Arvest Bank’s Skyline Report, the market had a net negative absorption of 421,692 SF.
The warehouse submarket was the hardest hit, with previously leased warehouse space becoming vacant. It accounted for about half of the net negative absorption. The submarket didn’t add square footage, but the vacancy increased to 8.1 percent from 5.8 percent. Researchers said that rate still reflective of a healthy submarket.
The office submarket added 134,688 SF, and 165,224 SF was absorbed. Its vacancy rate of 9.1 percent was unchanged from the second half of 2017.
The retail submarket "showed resilience" even though it has been under pressure nationally, according to a news release. It added 77,000 SF and Sears and Toys "R" Us locations closed. The vacancy rate was 9.7 percent, up from 8.9 percent.
Commercial building permits for the first half of this year totaled $188 million, a 61.4 percent increase from the $116 million in permits issued in the first half of 2017.
"The office market in Northwest Arkansas continues to show strength and the ability to absorb the new space being introduced in the market," Mervin Jebaraj, lead researcher for the Skyline Report, said in a news release. "During this cycle, we were also impressed with the retail market, as it continues to outperform national trends, even as large national retailers close and vacate local retail space. While the vacancy rate increased, it remains at healthy levels, and the market seems to be adjusting to the new retail landscape."
Jebaraj, who is director of the Center for Business & Economic Research at the University of Arkansas' Walton College of Business, also noted that while the warehouse sector experienced a week period in the first half of the year, it's always been a volatile market due to its small size.
"To have a bad six-month period and still have a vacancy rate of just 8.1 percent tells us that there is no significant reason to worry about the warehouse market as the move to more e-commerce is expected to create sustained, long-term need for warehouse space," he said.
Chris Thornton, executive vice president/loan manager with Arvest Bank, was encouraged by the report, which he said showed the commercial real estate market in northwest Arkansas well-balanced and growing.
"We continue to work with our real estate development customers to help them identify the specific types of developments needed to match the growth in the market," he said. "Our commercial real estate financing teams will continue helping customers build the right projects at the right place and in the right time."