Building Sales Cause Dip In Office Occupancy

by George Waldon  on Monday, Jul. 23, 2012 12:00 am  

Southwest Power Pool is moving to a new west Little Rock campus. (Photo by Michael Pirnique)

The occupancy rate for office space in the Pulaski County market dropped to 85.7 percent in the spring, according to the Central Arkansas Commercial Data Exchange. That figure stood at 87.3 percent a year ago.

The exchange, an affiliation of local commercial real estate professionals who pool sales and leasing information for office, retail and industrial properties, tracks 266 office buildings housing nearly 14 million SF.

“I see our vacancy rate staying in that 15 percent range for awhile, and I don’t see rents moving up or down that much,” said Mark Bentley, director of brokerage, at the Little Rock office of Colliers International.

The one-year decline is largely attributable to three former Alltel buildings hitting the market with a combined 195,000 SF. Purchased from an affiliate of Verizon for $10.5 million in December by a local investment group, the office buildings in the Riverdale submarket have begun attracting tenants.

Centen Corp., which signed a 25,000-SF lease, will be relocating from quarters in west Little Rock’s Westlake Corporate Park.

“That was a significant deal that a lot of people were chasing,” said John Martin, senior broker at Little Rock’s Moses Tucker Real Estate Inc.

More inventory is coming on the market soon when Southwest Power Pool moves to its west Little Rock campus with a 34,000-SF control center, a 150,000-SF administration building and a two-story parking deck.

The consolidation to the 20-acre, $62 million headquarters campus at 16100 Pride Valley will leave a combined 90,000 SF vacant at the Plaza West Building (about 60,000 SF) at 415 N. McKinley St. in the Midtown submarket and at the GMAC Center (nearly 30,000 SF) at 16101 La Grande Drive in west Little Rock.

The move from tenant to owner will enlarge the market vacancy rate.

“We’ll see that number pop up,” Martin said. “We won’t see any change until new users come to the market. We can only cannibalize ourselves so much before we see some real growth.”

A 212,000-SF office building on the former Alltel campus also is available for sale or lease.

“We’ve got some pretty good sized blocks of space back on the market,” said Daryl Peeples, president of Flake & Kelley Commercial. “We’ve got some work cut out for us.

“There’s been a little bit of absorption, a little bit of contraction. It’s been fairly stagnant and been that way for a year and a half.”

Two long vacant buildings in the downtown market are in play at 318-324 Main St. The historic Blass Building, now dubbed Mann Building, at 324 Main St. will be converted to 100,000 SF of office space, 20 loft-style apartments and some retail.

The state Office of Child Support Enforcement will relocate from the Arkla Plaza at 400 E. Capitol Ave. and occupy about 65,000 SF.

“As it stands now, the plan is for the annex to be mainly apartments, and the ground floor across both buildings is retail,” said Martin, whose company Moses Tucker is developing the properties with the Doyle Rogers Co.

Bentley said the local office scene is holding its own compared to others around the country.

“The office market is still relatively flat,” Bentley said. “We had made up a bunch of ground the past year and half or so. The first quarter of this year we backed up a little bit (because of the Alltel property). But compared nationally, that’s a pretty strong office market.”

Greg Joslin, sales associate at Little Rock’s Irwin Partners, echoed that upbeat assessment of the local market.

“Optimistically, our labor market is strong and unemployment levels remain well below the national average,” Joslin said. “Those facts, when combined with the early stages of economic recovery and the results of world-class economic development efforts marketing the metro Little Rock region should prove fruitful in coming months and generate new demand for various commercial real estate assets including office.

“Money is cheap with banks eager to lend; it’s a great time to consider buying office property or lock in some attractive lease terms.”



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