Activity, Low Vacancies Add Up to Hot Industrial Little Rock Market

The vacancy rate of the Little Rock industrial market dipped to 9.6 percent in the first quarter of 2017. More than 281,000 SF of space was absorbed during the first three months of the year as tracked by Central Arkansas Commercial Data Exchange.

“The market to me right now is very hot,” said Gary Smith, director of business development at Flake & Kelley Commercial. “There’s a lot of activity. The market is strong, and the vacancies are low.”

“There’s not a lot of product out there on the market. If there’s a time to build, it seems the time would be now if you’re looking for space in the 10,000- to 20,000-SF range.”

A year ago, the vacancy rate registered more than 11 percent. That marked a slight increase from more than 10.5 percent in 2015 and 2014.

“We’re getting down to what’s old and what becomes available,” said Rick Freeling, director of sales for Little Rock’s RPM Commercial. “What’s new and nice looking is taken.

“We’re trying to get cranked up to build some small industrial space capable of supporting as small as 3,000 up to 15,000 SF.”

The inventory is housed among 857 buildings divided among four industrial categories: warehouse-distribution, manufacturing, light industrial and flex space. Combined space: Nearly 45.5 million SF.

“We’re starting to get a lot of phones calls for tenants to lease space and purchasers,” said Rick Freeling, director of sales for Little Rock’s RPM Commercial. “We’re also getting more calls from out of state inquiring about available warehouse space in the market. That’s an indication that manufacturers are preparing to ramp up inventory.”

Three of the largest industrial property sales during 2016 included:

• The 311,684-SF FedEx Ground facility at 8 Industrial Parkway in Little Rock, $31.7 million.

• The 223,880-SF industrial project at 7400 Scott Hamilton Drive in Little Rock, $5.6 million.

• The 42,662-SF Colonel Glenn Business Center at 10303 Col. Glenn Road, $5 million.

Warehouse users are scouting the market and exploring their options as reports of manufacturers boosting production are heard.

“Those are all good signs, but it never breaks wide open here in Little Rock,” said Dan Robinson of Little Rock’s NAI Dan Robinson & Associates. “Most of our growth comes from people willing to develop out of their own pocketbook.

“There is pent up demand. I’m familiar with major companies in Arkansas with industrial needs that are straining at the gut to get something going.”

The 557,950-SF Applica Consumer Products project at 6901 Lindsey Road in the Little Rock Port Industrial Park continues to prove an elusive riddle in search of redevelopment answer.

The property affords a great building at a good location. But no one has stepped up to formulate a battle plan to take on the large project and divide it into smaller, more marketable chunks of space.

“Outside a lack of new construction, I think we’re all happy with the market today,” said Stuart Mackey, vice president of brokerage with Little Rock’s Coldwell Banker Commercial Hathaway Group.

“Activity is up, and that’s good. People are broadening their criteria, so more of central Arkansas is being covered.”

Mackey believes lease rates need to climb before construction of new flex space construction breaks loose in the market.

“There’s a gap between covering debt service for new construction and what you can get for rent,” he said. “It’s too big, a $2-$5 per SF spread dependent on the size of the project.”

CENTRAL ARKANSAS INDUSTRIAL 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.