LITTLE ROCK — Vacancy rates in commercial real estate are down across Benton and Washington counties, showing the oversupply of vacant commercial space in Northwest Arkansas is shrinking.
In the two-county area,704,285 square feet of commercial real estate were newly leased between January and June. The overall commercial real estate vacancy rate for Benton and Washington counties was 17.8 percent for the period, down from 19.8 percent for the same time in 2011.
The results came from the Skyline Report, a biannual analysis of the commercial real estate sector in Benton and Washington counties released earlier this week. The report, sponsored by Arvest Bank, is compiled by the Center for Business and Economic Research at the University of Arkansas at Fayetteville, a part of the Sam M. Walton School of Business.
Construction of new commercial properties is slowing, which is good news for those trying to rent existing space. During the first half of the year, $39.5 million in building permits tied to commercial projects were issued. That’s down 23 percent compared to $51.4 million issued for the same period in 2011.
Poor cash flow resulting from vacancies can limit building owners’ ability to pay back banks, said Kathy Deck, director of the Center for Business and Economic Research. She noted that anything that weakens banks can be detrimental to the economy as a whole.
She said the region’s vacancy rate won’t be considered stable until it falls to the 10 to 15 percent range.
The only sub-sector to see vacancy rates go up was office/warehouse, where rates increased to 19 percent for the first half of the year, compared with 17.8 percent for the same period in 2011.
Brian Shaw, managing partner at Sage Partners, which operates in Northwest and central Arkansas and specializes in brokerage and corporate services, development and commercial investments,said the market has steadily improved over the past two years. He expected things to continue to pick up.
He said several factors have helped push the commercial market forward in Northwest Arkansas, including business from the Wal-Mart Stores Inc. vendor community; banks and developers pulling back from speculative building; and low interest rates that make it attractive for some business owners to purchase a commercial lot and build an office of their own.
For commercial properties,space in desirable locations is “getting tight,” Shaw said.
Mark Ryan, executive vice president for commercial lending at Arvest Bank in Benton County, said he’s seeing increased demand in the office and retail sections, particularly for medical offices.
He said retail property in or near the Pinnacle Promenade retail center in Rogers is in demand, and he’s seeing increased activity in Bentonville’s downtown, spurred by the Crystal Bridges Museum of American Art that opened in November 2011.
Business, Pages 31 on 09/29/2012