Run On Retail Space Has Phones Ringing

The occupancy rate for retail space in Pulaski County ratcheted up to 92.6 percent in spring 2013. That figure stood at 91.7 percent a year ago, according to data compiled by the Central Arkansas Commercial Data Exchange.

The affiliation of local commercial real estate professionals pools sales and leasing information for 359 retail properties with more than 16.8 million SF.

“The phone is ringing, which has not been that case the past couple years,” said Mark Bingman, vice president at Little Rock’s Rector Phillips Morse Inc.

“We’re under the national vacancy rate, which is just over 10 percent. Restaurants seem to be the most active, but there are other retailers looking as well.”

Costco has scouted the market, Lowe’s continues circling and CVS Caremark is expected to roll into town to compete with archrival Walgreen’s. Many companies are focused on finding and redeveloping properties left vacant by the shakeout of retailers.

“When all the bargains are gone, all the national retailers will re-evaluate where they are,” said Jeff Yates, partner at Little Rock’s Irwin Partners. “There’s at least a couple hundred thousand SF of retail space rumbling around the market, but they just can’t find a deal they want to do.

“There are not any medium to large suites available, in the 15,000-SF to 40,000-SF range. The bottom line is we don’t have a lot of available inventory, and the inventory we do have available is small shop space.”

A 120,000-SF Bass Pro Shops, set to open in November, started a string of development activity at Little Rock’s Gateway Town Center, a 169-acre project at the northwest corner of Interstates 30 and 430.

Joe Jackson Sr. of Boca Raton, Fla., and Rich Rucker of Silverdale, Wash., intend to develop a 350,000-SF outlet mall. The number reflects bigger plans compared to last year’s 265,000 SF.

“The outlet mall site should close by October,” said Tommy Hodges, developer of Gateway Town Center. “They’re in lease up and doing great. I can’t give you any names, but it’s everybody you’ve ever heard of.

“The last plan I saw had 79 stores in it. They’ve really had a good response.”

Hodges said site work for the outlet mall should begin this fall with opening scheduled for November 2014.

He also anticipates construction to begin next year on three outparcels, which have drawn letters of intent from a restaurant and a national retailer. The third location will become home to a branch for Malvern National Bank, set to join First Security Bank at Gateway Town Center.

Farther south, the Retail Connection of Dallas is championing the proposed Benton Town Center. The opening phase of the retail center would encompass 516,000 SF on a 48-acre site at the northwest corner of Interstate 30 and Arkansas 229 on the south side of Benton.

In November, The Texas developer’s initial site plan listed three retailing chains as having signed letters of intent to set up shop at the project: Dick’s Sporting Goods, Michael’s and Ulta Beauty.

In June, the roster of retailers designated as having signed letters of intent expanded to include Bed Bath & Beyond, T.J. Maxx, Encore Shoes, Rack Room Shoes, Dressbarn, Maurices, Charming Charlie, Monarch Dental, Texas Roadhouse, The Children’s Place and Claire’s.

Meanwhile, the market tension between new and existing retail space continues to build.

“There are retailers out there who would come to Little Rock if the space and price was right,” Yates said. “The retailers are wanting those lower, single-digit rents from second generation space. Those deals are about gone.

“As long as the retailers can keep finding those cheap deals, they are willing to skip over a market,” Yates said. “They are in bargain-shopping mode and are snapping up bargains wherever can find them.

“It’s not just when our market runs out of available big box space. Other markets have to run out of inventory. Then, we’ll see more new construction.”

The biggest block of empty retail space awaiting a deal in the market, at 76,000 SF, is the former Wal-Mart store in the Levy area of North Little Rock.

At last report, the one-time home of Brandon House Furniture is under contract in a deal that could bring new life to the 130,000-SF building at 1100 S. University Ave. in Little Rock.

James Barnes BBA Solutions hopes to buy it, use about 30,000 SF for his BBA Solutions college textbook venture and lease out the remaining space.

The 43,000-SF former Sports Authority store at 11700 Chenal Parkway is on the drawing boards to be converted into an LA Fitness facility.

Rezoning is now in place to facilitate the relocation of Whole Foods into the former 39,200-SF Linens N Things store at 501 S. Bowman Road. That move would leave a 22,400-SF vacancy at The Village at Pleasant Valley, a 90,400-SF retail center at 10700 Rodney Parham Road.

A wild card in the market is Sears Holdings Corp., representing the 2005 merger of Sears, Roebuck and Co. and Kmart. The combined operations of the two chains continue to struggle, and store closings have followed efforts to stabilize profitability.

Retail watchers wonder when the company might close or reposition a Kmart or Sears store in the market.

“It seems like high-end retailers and discounters are thriving, while those in the middle continue to look for ways to improve their operating efficiencies,” said Brooke Miller, broker-leasing agent with Little Rock’s Flake & Kelley Commercial. “The shift to smaller boxes is a continuing trend. Big boxes are going medium, and medium boxes are going smaller. Successful retailers are looking in smaller markets with new, smaller prototypes.”