Skyline Report: NWA commercial vacancy rises to 7.2%, market ‘remarkably healthy’

Commercial vacancy in Northwest Arkansas increased by 1.4 percentage points to 7.2% in the first half of 2025, according to the Skyline Report released Tuesday (Sept. 23). It was the highest rate since the second half of 2021 when it was 8.3%.

Still, officials said the market “remains balanced” and is “remarkably healthy” as building permit values rise despite the new Walmart Home Office project winding down.

Fayetteville-chartered Arvest Bank^[1], in collaboration with the Center for Business and Economic Research^[2] (CBER) at Sam M. Walton College of Business at the University of Arkansas, released the Skyline Report on commercial real estate in Northwest Arkansas for the first half of 2025.

Commercial vacancy increased from 5.8% in the second half of 2024, with the addition of 204,076 square feet of space and net negative absorption of 648,360 square feet.

The vacancy rate for the three largest commercial submarkets increased, led by the warehouse market, which rose from 7.6% in the second half of 2024 to 10.4% in the first half of 2025. Almost 400,000 square feet of warehouse space became vacant, the majority of which was the result of one company leaving 300,000 square feet of leased space and relocating to a previously subleased space, according to CBER researchers. Arvest declined to release the name of the company that relocated.

The next highest vacancy rate increase was in the retail market, which increased to 6.6% from 4.9% in the second half of 2024. According to CBER, this increase was primarily attributed to national retailers that have “ceased operations” or closed a “significant number of locations.”

The office submarket vacancy rate rose from 6.3% in the second half of 2024 to 6.8% in the first half of 2025. About 100,000 square feet of previously owner-occupied space became available in the lease market. The vacancy rate increased from the previous period, but it is lower than the first half of 2024 when the rate was 7.5%.

“While the overall vacancy rate increased in this report, the commercial real estate market in Northwest Arkansas continues to be remarkably healthy,” CBER Director Mervin Jebaraj said. “One comment we have heard from conversations with real estate professionals is that while low vacancy rates are generally considered positive, in a growing and dynamic market like ours, very low vacancy rates can also create challenges with limited availability. One aspect of this report that also points to a healthy market is strong building permits that were well dispersed geographically and by sector.”

The value of commercial building permits issued in the first half of 2025 rose by 48.3% to $290.2 million from $195.7 million in the second half of 2024. This includes $14.2 million in permits associated with the new Walmart Home Office, or 4.9% of the total value in building permits. It was the highest percentage of Walmart-related permits since the first half of 2023 when they accounted for 13.1% of the total.

In the early stages of the project, the new Home Office was a primary driver for the region’s building permit values. From the first half of 2021 through the first half of 2023, 53.2% of the $1.77 billion in Northwest Arkansas permits was attributed to the new Home Office project. Since then, Walmart accounted for only 1.7% of the $1.18 billion in permits. This shows that “non-Walmart commercial development has increased significantly as the project winds down.”

Excluding the Walmart-related permits, the $276 million in permits in the first half of 2025 was the third-highest value of permits since the inception of the Skyline Report.

“While this Skyline Report shows an increase in vacancy rates, the increase in commercial building permits demonstrates that our region continues to expand and remains balanced,” said Gene Gates, executive vice president and loan manager at Arvest Bank of Fayetteville. “The commercial lending teams at Arvest Bank throughout Northwest Arkansas have been working hard to support our commercial development customers as they build and manage the space our market needs.”

The Arvest Skyline Report is a biannual analysis of the commercial, single-family residential and multifamily residential property markets in Benton and Washington counties. The report is sponsored by Arvest Bank and conducted by CBER.

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