The occupancy rate in the Pulaski County office market during the past 12 months tightened to 91.5 percent. During the first quarter 2014, the average occupancy stood at 88.7 percent.
“Our vacancy rate over the entire market has dropped steadily now for six straight quarters,” said John Hathaway, sales associate at Little Rock’s Coldwell Banker Commercial Hathaway Group. “We have very few large blocks of contiguous space available.
“If this trend continues, the logical progression will involve higher rental rates, and eventually new construction of office space. In fact, we are already seeing that, especially for users or developers with a partial use for the space. What was a tenant’s market two years ago is steadily transitioning to a landlord’s market.”
The census covers 268 office buildings totaling more than 14.4 million SF, tracked by Central Arkansas Commercial Data Exchange.
Little Rock’s Whisinvest Realty LLC has started development of two office buildings. The west Little Rock projects, 32,000 SF at 1400 Kirk Road and 10,000 SF at 1700 Kirk Road, are devoted almost exclusively to speculative office space. The lone exception is space earmarked as the new home for Whisinvest Realty.
“That’s a good sign that people are willing to build some spec space,” said Mark Bentley, managing director of Colliers International’s central Arkansas office. “There will be probably have to be some serious pre-leasing activity before any large projects come out of the ground.”
A three-story, 60,000-SF office building is on the drawing board not far to the southwest from the Whisinvest projects. Farther to the east, a two-story, 30,000-SF office building also is in the planning stages in the Chenal Parkway-Markham Street corridor.
“We’re waiting on an anchor tenant to kick that project off, too,” said Bill Pendergist, partner at Little Rock’s Flake & Kelley Commercial, which is working on both projects.
“There’s not a lot of product in that area of west Little Rock. The highest demand that I’m seeing is in the west Little Rock class A office market.”
West Little Rock Accessibility
The Big Rock interchange has already begun improving accessibility in west Little Rock, although all pieces of the $125 million project at Interstates 630 and 430 won’t be completed until summer.
The biggest news in the office market of late is Arkansas Blue Cross and Blue Shield leasing eight floors in Little Rock’s Riverfront Plaza.
The move boosted occupancy in the former Alltel campus to more than 80 percent, according to Colliers International, which is overseeing the lease up of the project.
The Blue Cross deal encompassed about 150,000 SF, floors 2-9 of the 12-story building on Allied Drive. The health insurance provider began consolidating about 765 staffers into its new space in April and expected to have the transition completed in August.
“Big blocks of space are pretty rare in the market right now,” said John Martin, senior broker at Little Rock’s Moses Tucker Real Estate Inc. “When there’s opportunity for consolidation people are looking closely at that.”
About 40 percent of the $18 million Midtown Medical Park project in midtown Little Rock is leased. The 65,669-SF office building opened last June.
The four-story building at 6119 Midtown Ave. is the first of two planned for the site of the former Doctors Hospital.
“The market continues to improve and is very healthy, but we’re lacking that big, new employer,” Martin said. “How do we attract that 1,500-3,000 new employee company? That would be significant. It would affect the market across the board.
“Forecasting forward, we’ll continue to see some positive activity. Activity in the Riverdale area is drawing folks [to relocate]. There will be some opportunities in some of the downtown towers because of that.”
Downtown Redevelopment
Redevelopment has taken some older downtown buildings out of the market and introduced some new projects as well.
The former home of Mr. Cool’s Clothing at 301 Main St. was razed to make room for a new $3.2 million, four-story office building.
Across the street at 300 Main, the historic renovation of the Fulk Building is transforming the former home of Bennett’s Military Supply into the new home of Cranford Johnson Robinson Woods. The state’s largest advertising firm will occupy the entire 21,000-SF building.
“The office market is pretty strong,” said Mark Bentley. “Rental rates are starting to inch up a little bit. The downtown market is leading the charge, and there are a couple of new projects under way, too.
“That’s pretty exciting. I can’t remember the last time that happened. That’s a good sign for downtown.”
Office Occupancy
Little Rock – Downtown Little Rock – East Little Rock – Midtown Little Rock – South Little Rock – Southwest Little Rock – West Maumelle North Little Rock Sherwood Benton Bryant Cabot Conway Jacksonville
Buildings 76 Inventory 6,898,998 SF Total Vacant 415,757 SF
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