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Industrial Land in Northwest Arkansas Getting Tight for Distribution

3 min read

CrossMar Park in Bentonville is growing.

The industrial park started with a 150,000-SF building that was completed in 2014 and fully leased soon thereafter. The 180-acre park has a second building with 200,000 SF scheduled to go, and a third 150,000-SF building is in the planning stage.

“It will be Class A industrial, and we don’t have very much of this in our market,” said Brian Shaw, managing director of Sage Partners in Fayetteville, which is handling the leasing for the park.

Shaw and Butch Gurganus of Colliers International in Bentonville said the industrial market is a tight fix in northwest Arkansas. There’s approximately 30 million SF with a vacancy rate less than 5 percent.

Much of the industrial space that may be available is also problematic because old buildings can be ill-suited for today’s business requirements. One solution then is to find some good land and build industrial warehouses and distribution centers on it, except experts said that is easier said than done.

“If they’re looking for a big building — 150,000 SF — they’re going to be looking for a site,” Gurganus said. “There’s nothing [existing] available. The rest of them are real junkers.

“Part of the constraint is land prices. We’ve always had higher land prices than I typically see elsewhere.”

Gurganus said part of the problem with land being overpriced is because some owners are being unrealistic. Industrial land generally isn’t as lucrative to sell as other commercial-use land, and much of what could be good industrial property isn’t.

“Everybody went out and zoned everything commercial,” Gurganus said. “You can’t have 1,000 acres of commercial property. The commercial, if we’re talking retail, is only so far off the highway. You can’t have a chunk of 1,000 acres and say, ‘Oh, this is all going to be commercial at $10 a foot. It just doesn’t work.”

Gurganus said that dilemma would eventually work itself out.

“You have to wait for everything to grow up around them and let all the commercial retail happen,” Gurganus said. “Then what you have left over, you’ll never be able to sell so they sell it as something else.”

Northwest Arkansas has some promising areas. CrossMar, out by the Wal-Mart distribution center and the airport, is in one, and Gurganus said Lowell is another good industrial region.

Shaw said Sage Partners is handling the sale of an industrial building in east Springdale that has attracted a lot of interest from investors.

“Lowell has always been a hotspot where people look,” Gurganus said. “A lot of people from out of town will at least look at Lowell. Highway 71 and Interstate 49 are right there and land is a little bit cheaper.”

Shaw said there is demand for industrial space, but it’s not so feverish that investors are going to go out and scoop up land and start building warehouses and distribution centers. One, land isn’t cheap and two, no one wants to outrun the market.

“It has always been a big investment; they’re big, large buildings,” Shaw said. “The demand is steady but it’s not limitless. Investors have to really understand the market and when to build. It could get easily overbuilt.

“If you went out and built ten 200,000-SF buildings, the market would get overbuilt pretty quickly.”

Gurganus wonders how much economic business northwest Arkansas really misses out on because of its tight industrial market. He doesn’t think of the area as a strong distribution market — and most of today’s industrial needs are warehousing- and distribution-based.

“The people who have come here seem like they wanted to come here anyway, and it wasn’t necessarily economic incentives,” Gurganus said. “They wanted to be here. Now, when people say ‘industrial nationally,’ they’re mostly talking about [a] distribution center. We are not a distribution hub. We don’t have major rail, we don’t have a freight airport, we don’t have water, we have one highway.”

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