The first half of 2021 saw commercial real estate generally rebound in two key counties in northwest Arkansas, but vacancy rates in the office sub-sector rose as covid-19 concerns grew. forced more employees to work from home, according to the Skyline report released on Tuesday.
The vacancy rate for all commercial properties in Benton and Washington counties was 8.9% for the first six months of 2021, compared to 10.8% for the two semesters 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 commercial space was added, resulting in a total positive absorption of approximately 907,000 square feet, the highest level since 2012. Positive net absorption occurs when more commercial space has been leased than made available on the market.
Mervin Jebaraj, director of the Center for Business and Economic 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, with $ 435 million going to Walmart’s new head office 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 largest total since the report began, Jebaraj said. .
“What is clear from this report is that the commercial real estate market in Northwest Arkansas continues to develop and overall demand continues to keep pace with growth.” said Kelly Carlson, head of commercial loans at Arvest Bank of Benton County. A declaration.
The Skyline Report examines the residential, commercial and multi-family real estate market in Benton and Washington counties. Researchers at the University of Arkansas and the Center for Business and Economic Research in Fayetteville are compiling data for the report. Arvest Bank first sponsored the Skyline Report in 2005.
In May, at the National Association of Realtors’ Forum on Trade Economic Issues and Trends, Lawrence Yun, the association’s chief economist, said economic expansion and job recovery would help improve rates. of occupation of all commercial real estate in the United States. is a professional 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 the decline in the vacancy rate in the first six months of the year, posting a vacancy rate of 6.6 % down almost 3% from 9.3% in the second half of 2020, according to the Horizon Report. No new warehouses were added during the period.
The office sector in the two counties saw its vacancy rate climb to 11.2%, from 10.8% for the two semesters of 2020. During the first half of 2021, companies consolidated several office spaces of Class A with more employees working remotely while the pace of new and renewed leases has slowed due to covid-19. According to the report, the office sector added about 165,000 square feet, but only about 1,000 square feet was in use.
Jebaraj of the AU said most people did not expect the pandemic to continue to put pressure on the office sector.
âI don’t think most people expected to be working from home for that long,â he said.
The retail vacancy rate in Benton and Washington counties was 10.8%, unchanged from the second half of 2020.
Nationally, office rents have also declined, and it is not clear whether there will be more demand for space even as workers return to their offices, Yun of the National Association noted. real estate agents. 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 US companies will try new things about the way they operate. use the office space, but he is convinced that the sector will do well after a period of experimentation.
âWorking from home is the single most important issue for the future of commercial real estate coming out of covid-19,â Worth said.