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n central Arkansas, a trifecta of growth has emerged in the commercial real estate landscape. Non-residential construction, hotel financing, and consumer lending have all experienced significant upticks since 2024, signaling a dynamic market adapting to shifting economic tides.

    Arvest Bank's loan portfolio has been a bellwether for this trend, with a 7.5% overall increase in 2024 – more than double the national average. Residential home equity loans surged by 47%, residential construction loans rose by 36%, and consumer auto loans skyrocketed by 81%. Non-residential construction loans also saw a notable 46.5% growth over two years.

    This growth foretells a commercial real estate landscape in central Arkansas that will continue to evolve in 2025, with both opportunities and challenges on the horizon. The office sector, for instance, closed 2024 with a vacancy rate of 11.1%, showing marginal improvement from the previous year. Downtown Little Rock saw revitalization efforts, including high-profile lease renewals at Rose Law Firm and Central Arkansas Water's interim lease in Simmons Tower.

    However, demand for large office spaces remains limited as companies balance return-to-office policies with flexible work models. Looking ahead, vacancy rates are expected to remain steady, driven by businesses seeking strategic relocations and consolidations.

    The industrial sector has remained a bright spot in central Arkansas, with a vacancy rate of 4.8% – slightly higher than the previous year. Demand for mid-sized industrial spaces under 25,000 square feet remains high, while larger properties have seen slower leasing activity. Developers and investors continue to view the industrial sector as a safe bet, with rental rates projected to remain strong through 2025.

    Retail space in Central Arkansas saw an increase in vacancies, reaching 6.0% at the end of 2024 due to big-box closures. Despite this, lease rates have remained stable, buoyed by strong demand from restaurant, entertainment, and experiential retail operators. The sale of The Promenade at Chenal for $73 million underscores continued investor interest in well-positioned retail assets.

    Multifamily housing growth has been primarily driven by corporate investments in Northwest Arkansas, as well as a return-to-office trend. However, commercial development remains sluggish due to high interest rates, with investors hesitant despite recent rate drops.

    Home equity loans surged by 47% in 2024, reflecting a trend of homeowners investing in renovations rather than giving up historically low mortgage interest rates for today's higher rates. Hotel financing has also seen significant activity, particularly refinances and acquisitions – a trend expected to continue in 2025 as investor groups target existing hotels.

    While commercial real estate investment remains cautious due to perceived high rates and building costs, developers and investors continue to seek financing for projects with strong fundamentals. Past-due loans in the small business sector have ticked up slightly, indicating potential headwinds in that area.

    Central Arkansas' commercial real estate market remains resilient, with key growth areas in industrial, hospitality, and select residential segments. While moderate challenges persist in office space demand and big-box retail vacancies, strategic investments and a stable local economy position the region well for continued development in 2025.