A dearth of available Class A warehouse space combined with shrinking inventory of industrial property in general finally triggered new development activity this year in the Little Rock metropolitan market.
New mammoth ground-up warehouse developments by Amazon in Little Rock and North Little Rock further energized the industrial sector along with the dotcom giant’s additional satellite operations, which ate up more local space.
Enter the $16 million, 204,120-SF Central Commerce Center now under construction at 9401 Diamond Drive in North Little Rock, the biggest speculative project of its kind in a long time.
Other developers are looking to join the party, too, as the market’s profile as a distribution hub has gained prominence nationally with Amazon’s arrival.
In terms of scale, the development taking shape near the Galloway exit on Interstate 40 ranks as a top-tier Arkansas project for Colliers. By some measurements, the building dubbed C3 One is the company’s largest new construction effort in years.
“It certainly is square footage-wise,” said Phyllis Glaze, principal, executive vice president and director of development management at Colliers. “The Central Commerce Center is by far the most square footage we have built in quite some time. I can’t remember working on anything this size since the CARTI project, which was a joint venture with Flake & Kelley Commercial.”
The 170,000-SF cancer treatment center in west Little Rock weighed in at $90 million as construction launched in December 2013.
With cost as the measuring stick, the C3 project is more in line with a corporate office building Colliers is working on in Jefferson County.
“Dollarwise, it’s comparable to the Relyance Bank headquarters we’re developing in White Hall,” Glaze said. That $15 million project, which broke ground in February, will produce a three-story, 40,000-SF office building for Relyance.
Construction of C3 One began in May, a month after the 13.3-acre site was acquired for about $1.5 million.
“We contemplated doing a phased development where we could expand on the building,” said Bill Pendergist, vice president of brokerage at Colliers. “We would love to build another building or two north of that. We have an option on adjoining land with first rights of refusal on even more.”
Phase 1 construction encompasses full site preparation along with the 204,120-SF building and its concrete tilt-walls, 34 feet of clear height, early suppression fast response sprinklers, a rear truck court with multiple docks, loading ramps and paved trailer parking. The absence of an ESFR sprinkler system alone is often a deal-breaker for prospective national tenants.
In the Little Rock metro area, it’s been years since a developer stepped out to launch a comparable project to C3 One.
“On a speculative basis, it was John Burkhalter in Maumelle,” said Isaac Smith, president at Colliers. That project is 21 miles westward along the I-40 corridor from the C3 site.
In 2014, Burkhalter developed a 60,000-SF warehouse, about half of which is leased to Amazon these days. It was the second spec warehouse he built on a 10.5-acre site in the Burkhalter Business Park.
“I built a 100,000-SF spec building about 12 years ago,” the North Little Rock businessman said. “I built this a long time ago, but I’ve got the best warehouse space in the market. You know me: I build things the right way.”
Built in 2008, his 102,010-SF warehouse at 700 Burkhalter Commercial Drive is fully occupied, leased to the United States Postal Service and Scholastic Book Fairs.
Burkhalter credits veteran commercial realty exec Pete Hornibrook of Little Rock’s RPM Group for pointing out the market opportunity for new class A warehouse space and inspiring him to take on the risk of a speculative development.
“I’m on the verge of doing it again,” said Burkhalter, who owns more than 51 acres of adjoining industrial land in Maumelle. “I bet it’s another 120,000 square-footer.”
Dump Trucks Galore
Site work on the C3 development is winding down, a task that required altering the topography with 5 feet of fill material and the deployment of a half-dozen dump trucks running five and sometimes six days a week.
With a soil composition more suitable for duck hunting, the location was transformed into buildable land with the addition of 100,000 cubic yards of shale.
“That’s a lot of dump trucks,” said Bradford Gaines, director of new developments at Colliers. “That’s something like 6,700 loads.”
The biggest surprise on the project so far is a pleasant one: The cost of the fill work is coming in under budget.
The property was under contract four months before a local investment group assembled by Colliers acquired it in April. Even before the deal closed, the group took on the added risk of committing money to the project in an effort to avoid any COVID-induced disruption to building materials.
“We put the deposit on steel before we bought the land, so we kind of rolled the dice,” Smith said. “The investors are betting on the come. We don’t have a user committed on the front end.”
The larger than normal parking field allows configuration flexibility to accommodate tenant needs. Room for more trailer parking could become more room for employees, depending on the tenant.
Industrial tenants on a national scale were choosing St. Louis or Memphis over the Little Rock metropolitan area because there weren’t any acceptable options. The goal was to create a new option along the second-busiest stretch of highway on the national interstate system.
“The big question mark is rental rates, which are really low for the competitive market around here,” Smith said. “Can the rental rate support a $16 million building? We have got to prove that out.”