Construction seems to be the name of the game in the industrial real estate market in northwest Arkansas.
Ramsay Ball of Colliers International said the “slack” has come out of the market as the economy has improved and businesses have either moved into or expanded in the area. That has caused increased interest in land parcels that are zoned (or could be) for industrial buildings.
“It’s really hot,” said Butch Gurganus of Colliers International. “It has been steady and slow and now you turn around and nothing is available. They’re not just popping up. Everybody has figured out there’s not a lot of buildings out there. I’m getting a lot of calls about industrial land.”
Marshall Saviers of Sage Partners said one complication is that old industrial warehouses might not always be able to be converted to modern industrial warehouses. Saviers said if a company requires higher rack space or more loading docks, those can’t always be wedged into existing structures.
“The market is really tight for quality space,” Saviers said. “There is space up there, but when you look at what is up there a lot of it is functionally obsolete. People want taller ceilings, more modern sprinkler systems, better office space, all that good stuff. There’s just not a lot of that stuff out there of any size.”
Arthur Thurman, president and COO of Mathias Properties in Springdale, said demand for warehouse-office space has really picked up in recent months. The only recourse in many cases is to simply find somewhere to build what the client requires.
Mathias recently finished a 78,000-SF warehouse on Hudson Street in Rogers that has more than half its available space leased. Mathias is also in process of building two smaller spaces nearby.
Saviers and Sage are associated with the 150,000-SF CrossMar building at CrossMar Supplier Park in Bentonville.
“We’re building new because they’re looking for inventory, and we have increased demand,” Thurman said. “For the first time in quite some time, we have a waiting list for people wanting to get into some of our properties. That’s a sign, certainly, of an improved commercial real estate market.”
Gurganus said the current northwest Arkansas market reminded him of a time in Greenville, South Carolina, where a Colliers International warehouse sat empty for a couple of years before suddenly having a line of companies trying to lease it. Northwest Arkansas is experiencing some of that pent-up demand looking for space.
“If you’re looking above 150, there’s basically nothing out there,” Gurganus said. “Historically, for here, that’s a pretty big building. There might be a couple a year. You might not see one that big for a while then you might get a couple all at once.”
Northwest Arkansas should benefit from several ongoing factors, Saviers said. The population of the area recently surpassed 500,000 and continues to go up, and Wal-Mart Stores Inc. of Bentonville announced last year it wants to spend an additional $50 billion on U.S. products in the next 10 years.
The economic optimism has led to more speculative building, meaning a developer will start a project and then get tenants during or after construction. After the recession, a vast majority of builds were pre-leased so that the most of the eventual buildings were spoken for before construction began.
“We’re doing more and more [spec] because there is increased demand,” Thurman said. “In the past, the last several years, there was a lot of build-to-suit when the need was. We have several hundred thousands of feet we’re contemplating starting construction on. They may not all be built immediately.”
CrossMar is located across the street from Wal-Mart’s distribution center on Airport Boulevard, and Hudson Street where Mathias has several buildings planned or built is a straight shot to Interstate 49. Accessible location is still an overriding concern in real estate.
“A lot of the space that is available is in east Rogers or east Springdale, which is tough to get to the interstate,” Saviers said. “The market used to be off of [Highway] 71, now it is off I-49.”
Thurman agreed. As an example he used Mathias’ Ozark Business Park, which is a flex space suitable for different uses and is located at the intersection of the interstate and Highway 412 in Springdale.
“It’s the same cycle the hospitality industry went through years ago when the primary access through northwest Arkansas was Highway 71,” Thurman said. “All the hotels were on Highway 71. As the interstate came into play, the convenience of those things, that’s what you’re seeing. You can head north, south, east or west fairly easily from that point.”
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