Northwest Arkansas Industrial Warehouse Market Stays Strong

Johnny Galloway of Cushman & Wakefield/Sage Partners says warehouse space demand in northwest Arkansas remains robust. (Michael Woods)

A massive influx of space in the northwest Arkansas industrial-warehouse market has done little to cool off the sector.

At a recent symposium in Bentonville, the real estate development group Cushman & Wakefield | Sage Partners reported that 1.9 million SF of warehouse space had been added to northwest Arkansas in 2025, but the vacancy rate still was a respectable 6.4%.

The warehouse sector, which includes buildings large and small for industrial, distribution and storage uses, is an often overlooked market in commercial real estate. Industrial warehouses don’t usually have the fancy modern amenities of office complexes or the sheer financial potency of multifamily developments.

But with Benton and Washington counties continuing their rapid population growth, it is still a critically important, and robust, market. Johnny Galloway, a director at Sage Partners, said the demand for industrial warehouse space has been strong for at least the past five years with no signs of slowing down.

“It’s a good time to be thinking about the industrial market,” Galloway said. “It remains really, really strong overall. There’s just a lot of demand as the area continues to grow. The vacancy rate is about 6.4% at the end of last year, and that is slightly up compared to some prior years. That has not been a reflection on demand.”

Galloway said the influx of supply to meet the demand hasn’t dimmed rent prices, which average $9.60 per SF, up 2.9% from a year ago. He said for a large building of more than 50,000 SF, rents are generally between $8 and $9 per SF; for a smaller flex building, rents are well into double digits.

“We’re continuing to set high bars on new asking rents,” Galloway said. “These are numbers that are really, really big by historical average, and are really a reflection of the demand.”

Firecracker Hot

Palmer Hays said the industrial warehouse sector may have cooled off a bit the past year but that cooldown is relative.

Northwest Arkansas is still a market most other regions dream of, said Hays, a principal and industrial specialist at Focus Commercial Real Estate in Rogers.

“I wouldn’t even say that there’s hiccups. I think we’re just returning to more of a normal environment,” Hays said. “The way that I would put it is we went from white hot to red hot. I would say that we’re still moving in a great direction.

“I would be very skeptical of a headline (that) read industrial velocity slowing and/or moderating in northwest Arkansas. Yes, it has slowed down, but we’ve slowed down from the greatest period ever, and we’re still in a very, very, very business-friendly environment.”

As with any financial market, commercial real estate is a competitive affair with multiple developers and investors scouring the region for every possible opportunity. However, Matt Brasel, president of CrossMar Investments of Bentonville, said a certain amount of teamwork is involved, too, to help keep the market healthy.

The fine balancing act is the fundamental one between supply and demand. Too much supply drives down rent profits, but too much demand can drive up project costs.

“Our goal and our intent has always been to have a balanced market,” Brasel said.

Brasel said if a market becomes overheated and developers and investors pump in too much product and money, the result can be, and has been, a jump in vacancies, a drop in rents and a weakening of the sector.

“The goal here is obviously to not create an environment like that,” Brasel said. “I think as a whole in the northwest Arkansas market, the developers work well together. For us, where we stand with our supply, what the market has from a supply standpoint and balancing that supply and demand metric — overall, we’re trying to maintain a healthy marketplace for long-term stability.”

Big & Small

One of the largest commercial real estate deals of the past year involved an industrial warehouse that CrossMar developed in Bentonville.

Upon completion, the investment company Runway Group of Bentonville paid $31.5 million through a subsidiary for the 284,896-SF property on more than 13 acres.

Runway Group is a holding company founded by Steuart and Tom Walton, grandsons of Walmart Inc. founder Sam Walton.

“They have leased out the majority of that space to pretty unique uses related to Walmart,” Galloway said. “It’s been fascinating to see who ends up needing these large buildings.”

Dude Wipes, a company that makes disposable wipes, recently leased a 200,000-SF building in Bentonville from CrossMar to better work with Walmart.

“They’re new to the market as well,” Brasel said. “It’s nice to, again, you’re either moving people [through] the flight to quality or you’re attracting new users within the market. Both are wins for northwest Arkansas industrial space as a whole, in my opinion.”

Not every industrial warehouse development is a sprawling facility. Many are less than 5,000 SF and are for smaller businesses that need the space for operations, like a mechanical business, or for storing materials, such as a construction supply company.

“There’s not really a blanket industrial or warehouse use,” Galloway said. “There’s a lot of nuance in the market in terms of who the tenants are, who the users are, and what the building needs to suit those particular tenants. There’s a wider range of asset class than there has historically been.”

Building an industrial warehouse is cheaper than an amenity-rich suite of offices, but that doesn’t mean costs aren’t a concern.

One of the biggest drivers is the cost of land, and the more attractive a tract is, the more competitive the bids to win it.

That can limit some warehouse projects because if a location is expensive to buy, it may be impossible to charge rents high enough to make the project financially feasible.

There are also occasionally obstacles from municipalities’ zoning regulations that can limit what can be built and where.

“In 2020 and 2021 and maybe in the early parts of 2022 there was a huge rush of development,” Galloway said. “At one point that kind of overheated the market. That has stabilized a little bit. There’s not nearly as much development in the pipeline now. The market has kind of caught up to where these asking rents were, and so the cooldown in development.

“It’s only a matter of time before development picks back up again. That’ll be interesting to see, particularly as the market gets on the map for out-of-state developers or more regional developers.”