Commercial construction in NWA slows in 1st Q.

Commercial construction hit the brakes during the first quarter of 2008, allowing positive net absorption and improved vacancy rates in some commercial submarkets, according to data from the first-quarter 2008 Skyline Report.

The report, commissioned by Arvest Bank and prepared by the Center for Business & Economic Research at the University of Arkansas' Walton College of Business, said that from December 2007 to February 2008, $37 million in commercial building permits were issued in northwest Arkansas, a 10.5 percent decline from the fourth quarter of 2007 and a 62 percent decline from a year prior.

The decrease in construction allowed for the absorption of 381,350 SF of competitive commercial space.

The positive absorption rate improved vacancy rates for four of the six submarkets tracked by the Skyline Report.

The retail submarket retains the lowest vacancy rate at 12 percent.

The office/warehouse submarket saw the largest decrease in vacancy rates from 28.7 percent during the fourth quarter of 2007 to 19.4 percent vacancy during the first quarter of 2008.

A total of 270,000 SF of office/warehouse space was added to the market, while 472,925 SF became occupied.

The medical office submarket saw 365,671 SF added to the market during the first quarter of 2008, increasing vacancy rates 3.8 percent to 17 percent for the first quarter.

Kathy Deck, director of CBER, said the positive absorption rates and improved vacancy rates for some submarkets indicate the commercial market is following the path of the area's residential market and taking steps to correct itself.

While vacancy rates are showing signs of improving, they are still above "healthy levels" of about 10 percent.

The area's multi-family market did not fare as well during the first quarter of 2008. Vacancy rates for multifamily properties on the northwest Arkansas market increased to 13.1 percent from 12 percent during the first quarter of 2007.

Consequently, the average lease price for a multi-family property unit decreased $4.53 to $515.31 a month.