More improvement in office occupancy in the Pulaski County market this year came as a mild surprise.
“We were sort of anticipating a soft first quarter 2016,” said John Martin, principal and vice president of commercial brokerage at Little Rock’s Moses Tucker Real Estate Inc. “But we ended up with positive absorption of 70,800 SF.”
The occupancy rate of the 14.5 million-SF central Arkansas office market reached 92.8 percent during the first three months of the year. That upward tick follows first quarter rates of 91.5 percent in 2015 and 88.7 percent in 2014.
The 2016 census covers 271 office buildings with combined vacant space of 1 million SF, tracked by Central Arkansas Commercial Data Exchange.
“We’re continuing to see improvement in the market,” said Bill Pendergist, partner at Little Rock’s Flake & Kelley Commercial. “We’re seeing small absorption each quarter. We’re now below 8 percent vacancy in the market, and that’s a very positive thing. It gives developers a chance to come from the ground up.”
Little Rock’s Whisinvest Realty is bringing the first of two new office buildings online at its Kirk Road Office Park.
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.
“Our first tenant has moved in, SCM Architects, who also did the design work,” said Jeff Maxwell, director of real estate development with Whisinvest Realty. “We’re starting tenant finishout for our new office.”
Promising deals stand to push occupancy in the 32,000-SF building to 75 percent, and a lease with DSG Consulting helped fill three-quarters of the smaller office project.
“Preleasing is good,” Maxwell said. “We’re getting a lot of activity now that people can see the buildings. We’ve had people looking in the 20,000-25,000-SF range. One was real serious, but they decided to stay where they were at. Another wanted to move in this fall, but we obviously can’t build something that fast.
“There’s enough interest that it may cause us to pull the trigger on the third building, 60,000 SF.”
Talk of would-be projects continues in west Little Rock. A three-story, 60,000-SF office building remains 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 is still in the planning stages in the Chenal Parkway-Markham Street corridor.
“It will be interesting to see how the market absorbs and handles that,” Martin said of the new space. “But we’re doing very well. I think that trend will continue.”
Among the notable office transactions during 2015, out-of-state investors acquired the 33,720-SF 333 Executive Court project in west Little Rock for $4.5 million.
Others included the 24,817-SF Winrock Place, $2.87 million; and 17,192-SF Pyramid Park Business Center, $2.9 million.
The 30-story Regions Center in downtown Little Rock and its adjoining six-story parking deck are marked for sale by its out-of-state owners. The 547,000-SF office tower at 400 W. Capitol Ave. carries a list price of $40 million.
For now, the property has a vacancy rate of about 8 percent that will balloon to more than 22 percent by summer. That’s when 86,165 SF of space leased by USAble Mutual Insurance Co. will open up.
“The options are limited for big square footage in the 25,000 SF range,” said Mark Bentley, managing director of Colliers International’s central Arkansas office. “There are just very few options for that larger block of space.”
Helping draw more attention downtown is continued development of the River Market District and the launch of the Little Rock Technology Park.
Phase 1 work began this spring to convert 38,000 SF at 415-417 Main St. for use as the project’s anchor building. Eventually, the planned $100 million tech park will encompass more than 600,000 SF spread over five phases. Phase 1 is expected to complete by early next year.
“Downtown is becoming a cool place to be again,” Pendergist said. “Rates are attractive because of older buildings with competitive pricing. The trade off is that parking is limited or more costly.
“I think the trend is shifting back downtown, but there’s growth out west. It’s healthy for everybody.”