Northwest Arkansas may be the safest bet in real estate — residential and commercial — in the country right now. The recent Arvest Skyline Report shows historic demand for both.
For commercial space, the report, which analyzes sales activity, vacancy rates and absorption in the first half of 2022, showed:
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► The vacancy rate for commercial real estate fell to 5.8%, down from 8.9% in the first half of 2021. It was the first time vacancy had fallen below 10% since the second half of 2017.
► The warehouse sector saw the most significant vacancy drop, falling to 0.8% from 6.6% in the first half of 2021. For all intents and purposes, there is no available warehouse space in Benton, Madison or Washington counties.
► Vacancy rates for office space fell to 9.1% from 11.2% in the first half of 2021.
The report also said that even though developers added 520,000 SF of commercial space in the first half of 2022 — more than twice the amount created in the first six months of 2021 — commercial vacancy fell significantly.
Clearly, the numbers show the warehouse subsector of the commercial market in the greatest need. This is in line with a national trend we’re seeing play out in Arkansas too, with companies seeking more space to stockpile goods and deploy products ordered online.
Mervin Jebaraj, director of the Center for Business & Economic Research at the University of Arkansas’ Sam M. Walton College of Business, oversees the Skyline Report. He said reaction to the warehouse shortage has been delayed.
“There is some spec building on the drawing board, but there really isn’t a whole lot active,” he told me in an email. The challenge there, he indicated, was that building warehouses is getting more expensive in terms of building costs, supply challenges and — possibly one day — commercial loan rates.
Office and retail space are another story. Those subsectors, Jebaraj said, can absorb more demand. And unlike warehouse space, there are major properties coming online right now.
Among them, two in Bentonville: The Ledger, John Kyles’ six-story, 230,000-SF behemoth at 240 S. Main St., and the Walton Family Foundation’s Peloton, a five-story, 176,120-SF complex at 211 NW A St., each offering retail and restaurant space alongside traditional and flexible office space.
Prospective tenants will be able to tour the Peloton after December, when the shell of the building is complete.
The Ledger, which has tenants moving in over the next several weeks, is focused on a particular kind of post-COVID office: one that’s communal, attractive and amenable to hybrid employees and coworking. Its Marlon Blackwell design is also emblematic of bicycle-loving Bentonville, with its exterior switchback ramps that allow cyclists and pedestrians to access each level.
And it’s a fitting symbol for the region as a whole, because interest in moving in is high. According to Marshall Saviers, the CEO of Cushman & Wakefield/Sage Partners, which manages the high-profile property, The Ledger, barely open, is already 60% spoken for.