Northwest Arkansas’ commercial real estate market continued to show resilience in the second quarter of 2025, with historically low office vacancy and consistent demand for retail space, according to the latest Market Report from Cushman & Wakefield | Sage Partners.
However, the industrial sector experienced a sharp correction this quarter.
Office vacancy in Northwest Arkansas hit a 15-year low of just 4.02%, significantly outperforming the national average of 20.7%. The few vacancies remaining are largely shell spaces, where tenant build-out timelines and costs have created longer absorption cycles.
“Despite national headlines around office vacancies, the Northwest Arkansas market remains incredibly tight,” said Marshall Saviers, CEO and principal at Cushman & Wakefield | Sage Partners. “We continue to see interest in high-quality, amenity-rich properties, with steady demand across the region.”
Retail demand held strong as well, with regional vacancy at 3.4%, nearly a full percentage point below the national average of 4.3%. With limited new supply and continued population growth, rent growth remains steady and retail investment continues in key mixed-use corridors like Rogers’ Pinnacle Hills.
Residential demand continues to rise, with rents up nearly 50% since 2019 despite over 7,000 units under construction.
INDUSTRIAL DEMAND
Industrial demand posted a net absorption decline of 548,988 square feet, a notable shift from the 857,617-square-feet gain seen in the first quarter. New deliveries dropped to just 122,014 square feet, reflecting developer caution in light of rising costs and vacancy upticks. Sage officials anticipate several pending deals to push absorption back into positive territory by year’s end.
Negative net absorption indicates that more industrial space was vacated than leased, signaling a potential slowdown in tenant demand or an increase in move-outs and consolidations. However, there are several significant deals in the works that should push absorption positive in the third and fourth quarters, according to the Sage report.
New deliveries in the industrial space also declined substantially, with just 122,014 square feet of new industrial product added in Q2 compared to 1,024,014 square feet in Q1, a 902,000-square-feet drop. This slowdown in construction completions may reflect growing caution from developers in response to rising vacancy rates, land costs, construction costs, and shifting market dynamics, the report said.
For the full Q2 2025 Market Report, visit www.sagepartners.com/news