Arvest released the second half of its Skyline Reports. The second half focuses on multifamily and commercial real estate in Northwest Arkansas including vacancy rates and the absorption of existing spaces. The first half of the report, released last month, focused on the residential real estate market in the same geographic area.
FAYETTEVILLE, Ark. – Arvest Bank today released its Skyline Reports on multifamily and commercial real estate in Northwest Arkansas for the last six months of 2013.
The multifamily real estate market’s vacancy rates were mixed in Benton and Washington counties. While the vacancy rates in Fayetteville and Bentonville increased, those in the area’s other major cities dropped. Overall, Northwest Arkansas’ vacancy rate increased to 5.8 percent in the second half of 2013 from the 4.3 percent reported in the same period of 2012 and up from the 4.0 percent reported in the first half of 2013.
Fayetteville experienced a large jump in vacancy rates, up to 7.7 percent from 4.6 percent in the second half of 2012, as 1,989 new bedrooms were added to the market in the last six months of 2013. Bentonville’s vacancy rate increased to 6.3 percent from the 2.4 percent reported in the second half of 2012.
“The multifamily market continues to be very tight in Northwest Arkansas and that will continue until new units are added across the region,” said Kathy Deck, lead researcher for the Skyline Report at the Center for Business and Economic Research at the Sam M. Walton College of Business, University of Arkansas at Fayetteville. “A tight market presents opportunities for developers across the communities of the region and we expect to see continuing announcements of additional units in the coming months.”
While the new student-driven multifamily complexes added to Fayetteville’s available supply of large-scale multifamily housing, the rise in Bentonville’s vacancy rate seems to be localized primarily in the complexes near the Northwest Arkansas Regional Airport, Deck said.
“We have also seen an increase in single family housing construction and absorption in that area, so the shift in the two areas may be related,” Deck said.
The average monthly lease price for a multifamily property unit in Northwest Arkansas increased slightly to $556.71 in the second half of 2013 from $545 reported in the first half of 2013. The average monthly lease rate per square foot was $0.66, up just two cents from the 0.64 reported in June 2013.
Positive absorption of existing space continues to bring down vacancy rates in the commercial real estate market in Northwest Arkansas, Deck said, although there remains a great deal of unoccupied space that is not generating income for owners.
Vacancy rates in the second half of 2013 decreased slightly in all submarkets of commercial real estate except for the medical office submarket. Medical office, which vacancy rate increased to 12.8 percent in the second half of 2013, was the only subcategory that reported an increase in the vacancy rate during the first half of 2013, up to 12.3 percent from the 9.9 percent reported at the end of 2012.
“We continue to see new development happening in the ‘hot spots’ of activity — Bentonville and the I540 corridor in Rogers,” Deck said. “We know that the activity is concentrated, but we are seeing increasing levels of building from more than just a couple of development companies. The plans in place mean that we are going to see a number of new developments come on line in the coming year.”
“As more businesses and developers are examining the market for opportunities, we remain cautiously optimistic for controlled, measured growth in Northwest Arkansas,” said Kent Williamson, Loan Manager with Arvest Bank in Springdale. “As always, the right development in the right location is good for the developer, good for the area and good for the lender that finances it. We at Arvest want to be known for helping with the right developments.”
In the second half of 2013, 492,006 total square feet of commercial space were absorbed, while 106,399 new square feet were added, netting positive absorption of 385,607 square feet in Northwest Arkansas.
The largest gains in absorption came in the retail submarket with 140,357 square feet, the office/warehouse submarket with net positive absorption of 83,495 square feet and the warehouse submarket with net positive absorption of 65,767 square feet. The office and industrial submarkets had positive net absorption of 33,471 square feet and 33,051 square feet respectively, while the retail/warehouse submarket had positive net absorption of 28,653 square feet and the office/retail submarket had positive net absorption of 813 square feet.
Conversations by CBER researchers with commercial developers and property managers during the second half of 2013 tended to be optimistic as to the growth opportunities of the economy in Northwest Arkansas. Panelists said that Class A office and retail markets continue to have the most potential for new growth, particularly in established “hot” locations. Multiple developers are ready and willing to build.
The Arvest Skyline Report is a biannual analysis of the latest commercial, single-family residential and multifamily residential property markets in Benton and Washington counties. The report is sponsored by Arvest Bank and conducted by the Center for Business and Economic Research in the Sam. M. Walton College of Business at the University of Arkansas (CBER).
In 2004, Arvest Bank entered into a contract with CBER to collect information about the local real estate markets. CBER researchers aggregated and analyzed data from local governments, property managers, visual inspections and the business media to provide a complete picture of the status of property markets in the two counties.
The Center for Business and Economic Research at the Sam M. Walton College of Business provides excellence in applied economic and business research to federal, state and local government, as well as to businesses currently operating or those that desire to operate in the state of Arkansas. The center further works to improve the economic opportunities of all Arkansans by conducting policy research in the public interest.