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Metro Little Rock Commercial Real Estate Ends 2023 on Mostly Positive Notes 

2 min read

Retail Growth Leads the Way, Office Could be Worse

The metro Little Rock office market continues to buck the dour national office trend of high vacancies, but still remains a market concern.

The 2023 Q4 office vacancy rate of 11.3% is on par with the average for the entire year. It’s slightly higher than Q3, but lower than the start of the year, which was 12.6%.

Office lease rates held steady throughout Q4 even as office users are shrinking. Most potential tenants were touring smaller space at just 3,000-4,000 SF.

Higher tenant improvement (TI) costs and moving expenses resulted in some tenants making the decision to remain where they are. However, some saw this as an opportunity to negotiate for other lease upgrades. 

Industrial Inventory Remains Low

Industrial vacancy rates slowly rose throughout 2023 with 3.2% in Q1 and 3.5% at the end of the fourth quarter.

The market also experienced an overall rise in flex space vacancy, which was 7.7% in Q1 and 7.9% at the end of the year. This is likely attributable to the fact that the industrial market is user-driven rather than speculative fill.

Once spec builds are completed, they are sitting vacant longer, thus the higher overall vacancy rate.

Lease renewals remained strong for small flex spaces in Q4. Industrial inventory is low for the 25,000-50,000 SF range for sales, and 20,000-25,000 SF for leases, leaving many tenants in-market. 

Local Shops, Restaurants Driving Retail Resurgence

Retail vacancy experienced steady recovery throughout 2023, ending the year at 4.4% vacancy compared to 8.8% at the start of the year.

While the market is still experiencing some national retail closures, local retail shops are mounting a comeback. Restaurants continue to shine within the retail sector. The amount of existing restaurant space available in the metro area is effectively zero.

This prized space is not staying on the market long. In the fourth quarter alone, west Little Rock’s Mellow Mushroom was backfilled with Walk-On’s Bistreaux & Bar, Draft + Table opened in the former Creegan’s space in Argenta, and downtown Little Rock’s Soulfish was backfilled with Big Bad Breakfast.

New restaurants are resorting to buying outparcels and building from scratch such as Whataburger in Benton, Little Rock and North Little Rock, and 7Brew in North Little Rock. 

If you’d like to learn more about metro Little Rock’s commercial real estate market news, subscribe to Colliers’ quarterly central Arkansas Market reports here



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