The third quarter of 2023 showed many signs of stability and improvement for the Little Rock metro commercial real estate market.
Vacancy rates held steady across all sectors this quarter with retail showing the most improvement. The North Little Rock submarket led the way with the most space sold coming in at 199,048 SF — 118,590 of which were retail sales including the Rose City Shopping Center at 323 E. Broadway St., an 83,695-SF property.
The South submarket leased the most space with 47,930 SF spread out nearly equally among the retail, flex and industrial sectors.
Office vacancy rates rose slightly in Q3 from 10.8% last quarter to 10.9%. Smaller office sales are still proving more popular while larger tenants remain scarce across all submarkets. Tenants are realizing that tenant improvement and construction costs are continuing to make the cost of moving too high so they are staying put a little longer. And with office/work-from-home hybrid policies still not set in stone for most businesses, renewals remain short-term.
Little Rock’s retail scene has shown improvement with restaurants and entertainment facilities contributing to a vacancy rate drop from 6.7% in Q2 to 5.4% in Q3, a great pandemic recovery signal for our market. Second generation restaurant spaces aren’t staying on the market long and there’s not much inventory currently available. Tenant improvements are expensive, so finding a space with an existing kitchen in place is helping those buildings stay full. But landlords have also lowered rates slightly to help offset TI costs for spaces in “cold shell” condition.
Industrial has stabilized following its meteoric rise during and immediately following the pandemic. Vacancy rates for Q1 and Q2 remained at 3.2% and we’ve only seen a slight uptick to 3.4% in Q3. Flex vacancy rates are down slightly from 7.4% to 6.4% this quarter. The smaller industrial/flex spaces are still leasing steadily, but we are seeing a slowdown on larger spaces. Industrial speculative development is paused as some new spec remains unused.
Notable construction projects for the quarter include the Arkansas Symphony Orchestra’s new 20,000-SF facility in the East submarket, which broke ground in August; the 1.2 million-SF Dollar General warehouse/distribution facility near the Galloway Exit in North Little Rock to be completed in 2024; the transformation and unveiling this quarter of George’s in the Heights (formerly Café Prego), and the planned $35 million restoration of the historic Boyle Building, also set for completion in 2024.