Room to grow : Slowing construction helps vacancy rates remain level
Posted on Wednesday, August 13, 2008
New commercial constr uction in Nor thwest Arkansas has dropped to its lowest level since Arvest Bank's Skyline Report began tracking this data in early 2004.
This is helping to gradually fill up a glut of vacant office and retail space in Northwest Arkansas, officials said.
For the second quarter of 2008, commercial building permits were reported at $ 13 million - a 79 percent decline from the $ 62 million reported one year ago, according to the Skyline Report.
The report also showed that during the second quarter, the office submarket showed gains compared to last year, absorbing almost 22, 000 square feet. During the second quarter last year, a net of about 270, 000 square feet of additional vacant space became available for lease.
The two cities with the biggest increase in vacant office space over the past 12 months are Fayetteville and Rogers.
Available office space in Fayetteville fell slightly between the first and second quarter of this year, but in the second quarter it increased from 273, 685 square feet last year to 440, 601 square feet this year.
Vacant office space in Rogers increased from 305, 730 square feet in the second quarter of 2007 to 396, 668 in the second quarter of this year.
Bentonville has the most vacant office space with 780, 416 square feet, but this is down from last year's second quarter total of 822, 831 square feet.
Overall, the vacancy rates in the Northwest Arkansas office market are holding steady between 19 percent and 20 percent over the past 12 months, according to the report.
An economist who oversees the preparation of the Skyline Report said the local real estate market is correcting itself.
"The market continues to have pretty high vacancy rates, higher than national averages," said Kathy Deck, director of the University of Arkansas' Center for Business and Economic Research. "The response has been that building permit activity has dropped off and the market is giving itself some breathing space."
"We are not going to see a lot of new space in the near future, which means the market has time to adjust from record levels of availability," she said. "Although employment and population growth have moderated, muted additional supply means that the market has the ability to absorb some of the space that is out there and head toward a more sustainable growth pattern."
The Skyline Report is a quarterly analysis of the real estate market in Benton and Washington counties. The report is funded by Arvest Bank and conducted by the Center for Business and Economic Research in the UA's Sam M. Walton College of Business. Skyline researchers use data from local governments, property managers, visual inspections and the business media.
A top manager at Arvest Bank is optimistic that positive absorption of office space reflects movement in the right direction for the region's real estate market.
Mark Ryan, executive vice president and loan manager at Arvest Bank in Rogers, said he "applauds developers, investors and builders for working together over the last several months to help our market continue to correct itself."
One sector of the commercial market that does not appear to be correcting itself is the office warehouse market, where almost 490, 000 square feet of additional space is available in the second quarter compared to the first quarter of this year.
Springdale and Fayetteville experienced the greatest increases in vacant space. Vacancy rates in the office warehouse market in these cities jumped because new space has entered the market and some large facilities that were once occupied are now for lease, Deck said.
Vacant retail space is also up overall during the past 12 months, and Rogers and Fayetteville have both seen big increases.
In Fayetteville, vacant retail space grew from 211, 137 square feet in the second quarter of 2007 to 317, 839 in this year's second quarter. In Rogers, vacant retail space decreased from 458, 416 square feet to 404, 133 square feet during the same period.
The bank is expected to release its Skyline Report on residential properties in the next couple of weeks, officials said.
Deck was candid in her overall assessment of the economy.
"Right now it's a tough economy. You can talk to anyone on the streets," she said. "It's tough for everybody. There's a lot of caution out there.
"Businesses, by and large, are having to make tough decisions. Hopefully the cutting that goes on now will set the seeds for the next boom."
FEEDBACK:
Something to say about this topic? Submit a Letter to the Editor online
