Central Arkansas Office Sector on Slow But Positive Curve

The vacancy rate in the 14.7 million-SF Pulaski County office market stood at about 7.8 percent during the first quarter of 2017. That marked a slight increase from 7.2 percent recorded a year ago.

“It’s a healthy office market,” said Bill Pendergist, partner at Little Rock’s Flake & Kelley Commercial. “There’s not a glut of space, and there’s good demand. Most of the property I’m handling is over 90 percent occupied.”

Vacant office space during the first three months totaled more than 1.1 million SF among 283 office properties tracked by Central Arkansas Commercial Data Exchange.

First quarter vacancy rates stood at 8.5 percent in 2015 and 11.3 percent in 2014.

“We’re still trending on a slower but positive direction with our vacancy,” said John Martin, principal and vice president of commercial brokerage at Little Rock’s Moses Tucker Real Estate Inc.

The 30-story Regions Center in downtown Little Rock and its adjoining six-story parking deck were pulled into Chapter 11 bankruptcy late last year to reorganize $30.4 million of debt.

The move by its out-of-state ownership group followed unsuccessful efforts to sell the building or refinance its debt and a $29.6 million foreclosure action by its financier group.

Occupancy at the 547,000-SF office tower has improved and is approaching 82 percent. Meanwhile, higher overall occupancy in the market is helping boost revenue.

“Our vacancy rate remains low, and we’re starting to see rents going north,” said John Hathaway, sales associate at Little Rock’s Coldwell Banker Commercial Hathaway Group. “The biggest news in the downtown market was Simmons Bank buying the Acxiom Building.”

The Pine Bluff bank acquired the 188,460-SF office building and supporting five-story parking deck at 601 E. Third St. for $25 million. The transaction will open up 65,000 SF of Simmons space in its namesake 40-story tower at 425 W. Capitol Ave. as the bank staffers relocate.

“That’s a significant footprint getting added to the inventory,” Martin said.

On the Acxiom side of the equation, the company has leased 11,215 SF of office space at 301 Main St. in Little Rock and dispersed other staffers elsewhere.

Office space was a major component of a $44 million transaction last year that encompassed three buildings and retail space on a 30-acre development at the northwest corner of Interstate 630 and University Avenue.

Little Rock Midtown Ltd., an affiliate of Provident Realty Advisors Inc. of Dallas, bought the 115,274-SF Doctors Building at 500 S. University Ave., the 69,734-SF Midtown Medical Park Building at 6119 Midtown Ave. and the 56,060-SF Doctors Plaza at 600 S. McKinley St.

Plans call for razing the Doctors Plaza to make room for more retail and expand the footprint occupied by parking and the 162,082-SF former Sears store at 600 S. University Ave. and the 14,137-SF Sears Auto & Tire Center at 602 S. University Ave.

The pending demise of Doctors Plaza put in motion construction of a new 80,000-SF medical office building off site to house its former tenant, Arkansas Specialty Orthopaedics. The group is developing its own $16 million project at 800 Fair Park Blvd. and expects to move there during the first quarter next year.

In west Little Rock, Bank of the Ozarks purchased 46.2 acres in 2016 for more than $12.5 million to develop a new corporate headquarters complex. Other large office transactions last year included:

• The 45,952-SF St. Vincent West Office Building at 10221 St. Vincent Way in west Little Rock, $14.1 million.

• The 124,900-SF Two Financial Centre at 10825 Financial Centre Parkway in west Little Rock, $11.3 million.

• Four office buildings and three parking lots for the Little Rock Technology Park in downtown Little Rock, $10.8 million.

“Activity is very strong,” Pendergist said. “We have lots of people out looking at space with some significant leases being wrapped up.”

Construction is under way on a two-story, 30,000-SF office building west of Old Town Road between Chenal Parkway and Markham Street.

At last report, the project is scheduled for completion by year’s end. New York Life Insurance is an anchor tenant for the development championed by Flake & Kelley Commercial.

Two spec office buildings brought on line by Little Rock’s Whisinvest Realty continue to lease up. The combined occupancy of the 32,000-SF project at 1400 Kirk Road and 10,000-SF project at 1700 Kirk Road in west Little Rock is at about 85 percent.

“Now we’re searching for tenants to give us an opportunity to do another office building,” said Jeff Maxwell, director of real estate development Whisinvest Realty.

Depending on what shakes out, that could be a single 60,000-SF project or the first of two 30,000-SF projects.

CENTRAL ARKANSAS OFFICE OCCUPANCY

Information reflects most up to date quarterly data available at time of publication. Figures provided by Xceligent.

See more of the 2017 Arkansas Business Office / Retail / Industrial Lease Guide.