The industrial market is a tricky one in northwest Arkansas.
The region’s economy is strong, as is its residential market, its office market and its retail market. Just about anywhere in northwest Arkansas, there are prominent signs advertising space for lease or land to build on.
That’s not quite how it works in the industrial market. Bill McClard, the former NFL kicker who is now a senior vice president with Lindsey & Associates, said industrial developers can’t wait around to be asked to build.
McClard is handling the leasing for a 130,000-SF building that Crossland Construction is building at 28th and J.
“It’s not preleased, and we have found you have to have at least a roof and walls or people are not going to wait for you to get a building done,” McClard said. “It’s almost build it and they will come. You put up a sign anywhere I’ve been in the state that says ‘Build To Suit’ and the sign will rot. You have to build something for people to look at.”
McClard said the warehouse building is approximately 30 percent completed, and he has begun to reach out to potential tenants. He said the space will possibly be subdivided if multiple tenants show interest.
“We’re soliciting people who might be interested and we’ve had a nibble or two on it,” McClard said. “We don’t have anything solid as yet. We’re still four months from having a building done.”
Butch Gurganus, a principal with Colliers International, said there isn’t a lot of industrial land available to build on. Or, more accurately, there is not a lot of land zoned for industrial construction.
Gurganus said a year ago that many people who have land for sale have the land zoned as commercial since commercial land attracts higher prices. Retail and office projects generate higher rents so developers can afford to pay more for those properties; industrial developments don’t have the same rent rates so land price is an important factor.
“There’s not much available of quality space,” Gurganus said. “There’s not a lot being built. We haven’t seen a lot of industrial being built. Whenever we look for industrial land, you can look for any kind of land, odds are you will have to rezone something.”
McClard agreed that finding the land is often the most problematic factor of the industrial market.
“Trying to find quality industrial land that you can build on that has a good location is very difficult,” McClard said. “We’ve built a couple of buildings in Bentonville, and we like Bentonville a lot but I had to go out there and rezone those. The city of Bentonville has been nice enough to work with us to rezone those.”
Industrial is also a diverse market from the tenants’ point of view. Industrial is not just 130,000-SF warehouses or a large manufacturing plant. Some industrial tenants need a much smaller place, making high land prices even more of a hurdle.
Gurganus said when he moved to northwest Arkansas more than a decade ago, there was the idea that industrial rates were the same regardless of the size of the development.
“There’s 10,000 [square] feet and 200,000 feet,” Gurganus said. “When I first came here in ’05 — and some people still think this way — there was no distinction between 10,000 and 200,000. There’s demand for both, but it’s hard to get the land numbers to work. You have to go a little further out.”
Both Gurganus and McClard said the industrial market in northwest Arkansas is more of a warehouse-distribution model than a manufacturing one. There is still hope that the continually growing region and Wal-Mart’s desire to bring more manufacturing to the United States will spur further industrial development in northwest Arkansas.
“There’s not space, but there’s not a lot of people looking for the space that is not there,” McClard said. “If suddenly we have people come to town that need space, there’s not much to look at. Our market is growing, we have 800 people a month coming in. We know that Wal-Mart would like to see manufacturing come in here, although that is somewhat difficult.
“We also have a president who is trying to bring some manufacturing and what better place to bring manufacturing than right next to the biggest retailer in the world if you’re building anything from Tonka toys to toasters.”
See more from the 2017 Northwest Arkansas Lease Guide.