Report: In NWA, Absorption Keeps Pace With New Units

Report: In NWA, Absorption Keeps Pace With New Units

The commercial real estate market in northwest Arkansas remained balanced and added new space during the first half of 2019, according to Arvest Bank's Skyline Report released Tuesday.

The overall vacancy rate was 11%, up slightly from 10.9% at the end of 2018. During the six-month period, 371,243 SF of newly constructed commercial space entered the market, while 472,451 SF was absorbed, for a positive net absorption of 101,208 SF.

The vacancy rate rose as previously owner-occupied space was vacated by owners and entered the rental market, the report said.

In the multifamily real estate sector, thousands of new units have entered the market, but, like the commercial space, absorption is more than keeping pace.

The overall vacancy rate for multifamily properties continued to decline and ended the period at 3.1%.

More: See the report highlights: commercial property | multifamily property.

"As we have said in the past, an overall vacancy rate under 5% is very healthy. This time last year, the multifamily vacancy rate was 3.9%, and now, a year later, it has fallen even more," Mervin Jebaraj, director of the Center for Business & Economic Research at the Sam M. Walton College of Business at the University of Arkansas, said in a news release. The center researches and writes the Skyline Report.

"The most significant decline in vacancy rates happened in Bentonville, which fell from 6.3% in the first half of 2018 to 3.1% in the first half of this year," he said. "Even with many more apartments being constructed and planned, we feel confident that the market will continue to absorb the majority of these new units as they offer proximity to desired services and amenities that are difficult to find in lower-priced single-family homes."

In addition, the office submarket added 107,766 SF of newly constructed space and absorbed 110,618 SF, resulting in positive net absorption of 2,852 SF. 

The overall vacancy rate for office space rose slightly from 8.4% at the end of 2018 to 8.6% at the end of the first half of 2019. 

"During the first half of this year and consistently over the past several years, there has been significant addition of new office space in the region, particularly in Benton County, and the market has showed consistent strength by keeping pace with these additions and remaining well-balanced and with a healthy vacancy rate," Jebaraj said.

In the retail submarket, the vacancy rate has dropped from 11.5% at the end of last year to 10.8%.

"As we know, the retail sector across the country has been under pressure as a result of changing consumer preferences, but the retail real estate market in Northwest Arkansas has adapted well as more service-oriented businesses have moved into traditional retail spaces," Jebaraj said. "Also, the steady population growth of the region has also contributed to a healthy retail market."