Benton and Washington counties see increased retail space

The first half of 2021 saw commercial real estate generally rebound in two key counties in northwest Arkansas, but vacancy rates in the office subsector rose amid covid-19 concerns pushed more employees to work from home, according to the Skyline report released on Tuesday.

The vacancy rate for all commercial property in Benton and Washington counties was 8.9% for the first six months of 2021, compared to 10.8% for the two halves of 2020, according to the report.

Approximately 1.15 million square feet were leased during the period while nearly 247,000 square feet of new retail space was added, resulting in a total positive uptake of approximately 907,000 square feet, the level the highest since 2012. Positive net uptake is when more retail space has been leased than was made available to the market.

Mervin Jebaraj, director of the Center for Business and Economics Research at the University of Arkansas, said demand in the warehouse industry is driven by a need for space as more people shop online in due to changing trends caused in part by the pandemic.

The value of building permits in the two counties hit a record high in the first half of this year at around $647 million, including $435 million allocated to Walmart’s new headquarters project in Bentonville. Excluding this project, the value of permits for the first half of 2021 was around $212 million, compared to nearly $189 million for the last half of 2020 and the second highest total since the start of the report, Jebaraj said. .

“What is clear from this report is that the commercial real estate market in Northwest Arkansas continues to grow and, generally speaking, demand continues to keep pace with the growth,” said Kelly Carlson, commercial lending manager at Arvest Bank of Benton County. A declaration.

The Skyline report examines the residential, commercial and multifamily real estate market in Benton and Washington counties. Researchers from the University of Arkansas, Center for Business and Economic Research in Fayetteville, are compiling data for the report. Arvest Bank first sponsored the Skyline report in 2005.

At the National Association of Realtors’ Business Economic Issues and Trends Forum in May, Lawrence Yun, the association’s chief economist, said economic expansion and job recovery will help improve occupancy rates in all commercial real estate in the United States. The National Association of Realtors is a trade association, with over 1.4 million members working in residential and commercial real estate.

In Benton and Washington counties, the warehouse sector was a major driver of lower vacancy rates in the first six months of the year, posting a vacancy rate of 6.6% in down nearly 3% from 9.3% in the second half of 2020, according to the Skyline Report. No new storage space was added during the period.

The office sector in both counties saw its vacancy rate increase to 11.2% from 10.8% for the two halves of 2020. During the first half of 2021, companies consolidated several office spaces from class A with more employees working remotely while pace of new hires and lease renewals slow due to covid-19. According to the report, the office sector added about 165,000 square feet, but only about 1,000 square feet were in use.

UA’s Jebaraj said most people did not expect the pandemic to continue to pressure the office sector.

“I don’t think most people expected to work from home for that long,” he said.

The retail vacancy rate in Benton and Washington counties was 10.8%, unchanged from the second half of 2020.

Nationwide, office rents have also fallen, and it’s unclear whether there will be more demand for space even as workers return to their offices, noted Yun of the National Association of Agents. real estate. The U.S. office vacancy rate is expected to remain at 16.5% in 2022, with retail vacancy rates projected at 11.5%, according to the association.

Also at the May conference, John D. Worth, executive vice president for investor research and outreach at the National Association of Real Estate Investment Trusts, said American companies will try new things about how they use the office space, but he is convinced that the sector will do well after a period of experimentation.

“Working from home is the most important issue facing the future of commercial real estate coming out of covid-19,” Worth said.