Stability continues despite office vacancies
The Little Rock metro commercial real estate market continued to make gains in the second quarter of 2024 despite continued office vacancies and cooling industrial development.
The office market continued its “wins and woes” pattern with a couple of significant sales and leases helping, but with vacancy rates still slightly elevated. Overall, the market continued to see widespread square-footage downsizing in health care, finance, insurance and other sectors with the “work from home” trend continuing.
Despite that, leasing activity has remained steady, yet slow. New construction has been halted as we see decent demand with a lack of supply and no new options available. One bright spot is the healthy amount of medical businesses currently looking for space.
The industrial market remained steady with vacancy rates lowering .2% for the quarter. While rental rates remain higher than years past, they have begun to level off on existing product. No new construction appears to be in the current pipeline and we are not expecting any speculative construction for the foreseeable future.
Retail remains the bright spot for the metro, with continued stability that follows along closely with national vacancy rates. Many retailers are considering second-generation space of adaptive re-use of existing structures as a way to avoid overwhelming startup costs. Junior retailer and big-box retailers are opening smaller concept stores, which contributes to retail’s continued evolution in our area.
Demand for multifamily property gained momentum in the quarter, resulting in more stability within the industry. Deal activity is beginning to pick up, but is still far below what we have seen in the past, likely due to stubbornly high interest rates.
Overall, Hot Springs vacancy rates increased across all sectors except retail, with the office sector experiencing the most significant year-over-year increase. Several exciting new retail developments are underway and C-stores are continuing to open in the area.
Also in Hot Springs, the industrial sector is witnessing sizeable growth in mini-storage facilities, and multifamily rents are also experiencing a significant increase.
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