Low Office Vacancy Rates Hold Steady

by George Waldon  on Monday, Jul. 29, 2013 12:00 am  

Occupancy in the Pulaski County office market tightened slightly to 88 percent during the past 12 months, according to the Central Arkansas Commercial Data Exchange. The spring 2012 occupancy rate was 86.3 percent.

The exchange, an affiliation of local commercial real estate professionals who pool sales and leasing information for office, retail and industrial properties tracked 264 office buildings with a combined 14 million SF.

Local market conditions compare favorably with the national average vacancy rate of 16 percent, according to numbers compiled by the National Association of Realtors.

“The Little Rock office market continues to be steady as she goes with little change in occupancy since second quarter 2012,” said Greg Joslin, sales associate at Little Rock’s Irwin Partners. “The overall central Arkansas office market is currently experiencing one of the lowest office vacancy rates at 12 percent when compared nationally.”

Office occupancy among 76 buildings with a combined 6.4 million SF is about 11.8 percent in the downtown Little Rock market.

Only about 7,800 SF of unleased office space remains at the Mann on Main project at 318-324 Main St. in downtown Little Rock. Redevelopment of the long-vacant, 140,000-SF properties includes a mix of office, residential and ground floor retail.

Three state agencies (Office of Child Support Enforcement, Arkansas State Board of Pharmacy and Crime Information Center) have filled most of the project’s 100,000 SF of office space.

“The response and activity we’ve had there remains very, very good,” said John Martin, senior broker at Little Rock’s Moses Tucker Real Estate Inc. “We anticipated having that building fully leased in the short-term.”

Moses Tucker is developing the Mann on Main project with the Doyle Rogers Co.

The relocation of OCSE offices will leave the Arkla Plaza vacant at 400 E. Capitol Ave. The 57,688-SF building, once the headquarters of Arkansas Louisiana Gas Co., is earmarked for demolishing and the 2-acre site for redevelopment.

“We think Main Street will mature and stabilize over the next year or so,” Martin said. “Development should begin to spread from Main along Capitol Avenue, where there needs to be a refocus and recommitment.”

Construction started in May on the $18 million Midtown Medical Park project in Little Rock. The four-story, 72,000-SF medical office building should be completed in a year.

Jeff Maxwell’s JM Development & Consulting LLC and Coldwell Banker Commercial Hathaway Group are leading the Little Rock development team on the project.

After Midtown Medical opens, the Doctors Hospital Building will be razed, and the site will be converted to parking and possibly another office building.

“Office rents have more or less been flat or lost a little bit of ground,” Martin said. “We anticipate that it will remain that way for the balance of the year. There is some good activity in the midtown area.”

Absorption continues of office space totaling more than 195,000 SF in three buildings on the former Alltel campus purchased by a local investment group from Verizon in December 2011 for $10.3 million.

Lease up of the first 89,100-SF building is all but finished, and the action has shifted to the second 89,100-SF office building.

“We’ve had a lot of activity here,” said Mark Bentley, director of brokerage at the Little Rock office of Colliers International. “We have a deal in play that would completely fill the first building in the Riverfront Plaza complex, and we’ve got the first floor leased in the second building.”

Occupancy among the 40 buildings in the Midtown Little Rock market has bumped up to 77.4 percent as the Riverfront Plaza fills. Another sizable leasing task in the 1.9 million-SF market is the Plaza West Building, where Southwest Power Pool vacated 60,000 SF and moved into its new west Little Rock campus.

“In terms of the buying and selling, the biggest deal is the sale of the GMAC Building,” Bentley said. “It was a strong number, about $139 per SF.”

Crain Investments Ltd., led by Larry Crain Sr., sold the 50,900-SF project at 16101 La Grande Drive in west Little Rock for $7.1 million. The 9.4-acre development was purchased in April by 16101 Properties LLC, led by Terry Fleming.

Occupancy in the 3.8 million-SF, 70-building office market in west Little Rock stands at 92.3 percent.

“Personally, I’m impressed and encouraged with our overall strong market,” said John Hathaway, sales associate at Little Rock’s Coldwell Banker Commercial Hathaway Group. “We have been able to absorb a huge chunk of space that came on the market relative to the sale of Alltel to Verizon.

“In my own experience, I’m beginning to see more confidence from tenants. Some are beginning to explore expansions, indicating growth and stability. Many are looking at longer base lease terms, an indication that the tenants’ crystal balls are getting clearer and more positive going forward.”

 

 

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