Office Demand Slips

Occupancy in the Pulaski County office market declined slightly for a second year, according to the Central Arkansas Commercial Data Exchange.

The exchange, an affiliation of local commercial real estate professionals who pool sales and leasing information for office, retail and industrial properties, reported spring occupancy of 87.5 percent compared to 88.2 percent in 2010.

“The last 12 months our office market has been pretty static, but I see that as positive,” said Mark Bentley, director of brokerage at the Little Rock office of Colliers International. “Our office market has held pretty firm.

“I’m not seeing much demand for new space, but we’re not seeing people downsizing or leaving the market. I don’t see it changing dramatically anytime soon. The market rents have held pretty firm.”

Verizon’s move to shed office space at the former Alltel campus in Little Rock’s Riverdale area has put upward of 335,000 SF in play. The big question is: What effect will a sale or lease have on the market?

The new Southwest Power Pool campus in west Little Rock will create 90,000 SF of vacant office space when the company consolidates operations.

The corporate headquarters occupies about 60,000 SF in the Plaza West Building at 415 N. McKinley St. in midtown Little Rock, and additional staffers work out of nearly 30,000 SF in the GMAC Center at 16101 La Grande Drive in west Little Rock.

“It’s been a pretty sleepy, quiet year, but there is a potential softening of the market with the Verizon space and Southwest Power Pool moving,” Bentley said.

Another new project expected to generate movement in the market is St. Vincent West. The first of three medical office buildings is expected to come on line in November in the first phase development of the 37-acre medical campus.

The 45,000-SF west Little Rock project, labeled an outpatient ambulatory destination, will be owned and operated by St. Vincent.

A 40,000-SF building, scheduled for completion in a year, will house an outpatient surgery center and imaging center on the ground floor with physician office space on the second floor.

“We’re working on finalizing that,” Tadd Richert, vice president of business development at St. Vincent Health System, said of the second building’s mix of tenants.

Orion Capital Partners of Little Rock and Lend Lease Dasco of Palm Beach Gardens, Fla., are helping make the St. Vincent West project happen.

John Martin, senior broker at Little Rock’s Moses Tucker Real Estate Inc., said the office projects that are faring best are those with owners willing to invest to keep properties updated and upgraded.

“Those are the ones who have been able to take advantage of a down market and put strong lease packages together,” Martin said.

“It’s still somewhat soft, but we’re starting to see some more activity during the past 60 days.”

Vacancy Rate Little Changed
During the first quarter of 2011, the office vacancy rate in Pulaski County fell slightly compared with fourth-quarter 2010, to 12.5 percent from 12.6 percent.

“Unemployment numbers remain largely unchanged in the central Arkansas region, influencing only moderate positive absorption of office space the past four quarters,” said Greg Joslin of Irwin Partners. “Continuing trends are concessions to credit tenants, shorter lease terms, office downsizing and upgrades to smaller office space in higher-class properties.”