Arvest Bank has released its Skyline Report on commercial real estate in Northwest Arkansas for the first half of 2023, and the results are promising. The report reveals that there has been an addition of 347,827 square feet of new space in the region over the past 12 months, signaling growth and development. Additionally, the vacancy rates have declined, indicating a healthy and balanced real estate market.
According to the report, the overall vacancy rate for commercial real estate in Northwest Arkansas was 6.4% in the first half of 2023, a slight increase from 5.7% in the same period of 2022 and 5.6% in the second half of 2022. It is worth noting that the increase in vacancy rates is mainly concentrated in three specific submarkets: warehouse, retail/warehouse, and office/warehouse.
However, the office submarket vacancy rate has actually decreased in the past year, from 9.1% in the first half of 2022 to 8.8% in the first half of 2023. This is an encouraging sign for Northwest Arkansas, especially when compared to the national vacancy rate of 16.4%, the highest since the global financial crisis of 2007-08, according to a report from Colliers International.
The retail submarket, on the other hand, has remained steady, with vacancy rates unchanged at 7.9% from the first half of last year. This stability in the retail sector further contributes to the overall health and balance of the commercial real estate market in Northwest Arkansas.
Mervin Jebaraj, CBER director and lead researcher for the Skyline Report, describes the commercial real estate market in Northwest Arkansas as “healthy and balanced,” which is somewhat unique compared to the national market. Despite new spaces being introduced into the market across all submarkets, the majority of these spaces are being leased. The only submarkets experiencing a year-over-year increase in vacancy rates are those in the warehouse category, but even these rates remain relatively low, with the largest category of warehouse space having a vacancy rate of less than 1% a year ago and now standing at 3.6%.
Although the total value of commercial building permits issued in the first half of 2023 was slightly lower than the previous year, dropping from $293.7 million in the second half of 2022 to $193.9 million, Arvest Bank remains confident in the strength of the commercial real estate market in Northwest Arkansas. Isaac McKinney, EVP and Loan Manager with Arvest Bank in Siloam Springs, emphasizes that despite the national headlines about stress in the commercial real estate market, the market in Northwest Arkansas remains strong. Arvest Bank continues to support commercial real estate developers in the area by providing them with the necessary financing.
The Arvest Skyline Report is a biannual analysis of the commercial, single-family residential, and multifamily residential property markets in Benton and Washington counties. Sponsored by Arvest Bank and conducted by CBER, the report serves as a valuable resource for understanding the trends and developments in the Northwest Arkansas real estate market.
In conclusion, the Skyline Report for the first half of 2023 shows positive growth and stability in the commercial real estate market in Northwest Arkansas. The addition of new space, declining vacancy rates (except in the warehouse category), and continued leasing activity all contribute to a healthy and balanced market. With the support of Arvest Bank and the confidence of local commercial real estate developers, Northwest Arkansas remains a strong and promising region for real estate investment and economic development.