Central Arkansas companies got more creative to weather the escalating interest rates and skyrocketing construction costs that took hold in the commercial real estate market in the first quarter of the year.
Space is tighter across the four main sectors and escalating costs hinder new construction.
Interest rates won’t be dropping any time soon although the Federal Reserve signaled on Wednesday that it may take a pause after raising interest rates for the 10th consecutive time in the past two years.
Increasing interest rates and construction costs are dampening new projects, prompting commercial tenants in the office and industrial markets to look at existing space. The problem is there is a lack of facilities available.
These factors are also driving rents higher, according to a first-quarter market analysis by Colliers of Arkansas.
“The market has seen a mix of existing and new tenants making moves,” Colliers says. “Some existing tenants have chosen to downsize and move for the best location rather than face the high construction costs of a new building. Some large tenants are looking for landlord/occupant properties that can provide the best value by allowing the owner/occupant control over the tenant’s improvements.”
Vacancy rates decreased in all four sectors measured by Colliers.
Growth continued in the industrial sector, the strongest in the region over the past two years, with vacancy rates falling in the first quarter from 3.6% to 3.2% at the end of the year. office vacancies decreased from 13.2% to 12.6%; Vacancies in flexible places decreased from 8.9% to 7.7%; Retail sales improved from 10.1% to 8.8%.
Colliers’ analysis also provides more evidence that the service industry – led by restaurants and entertainment – continues to regain steam after being devastated by the Covid pandemic. Restaurants and entertainment companies are leading the way in the retail sector with significant changes including the Park Plaza retail sale while Outlets are listed in Little Rock.
“Many retailers are looking for spaces that aren’t immediately available, which makes backfilling big box spaces when they come to market an attractive approach,” Colliers said.
Space is tight in the industrial sector.
“Many potential clients are looking for 50,000 to 300,000 square feet, and central Arkansas just doesn’t have the supply to meet the demand on the lower end,” Colliers noted.
Office tenants continue to experience mixed work schedules – a combination of home working opportunities and reporting requirements to the office – and this is leading companies to shrink their square footage.
“On the flip side, we’ve also seen many tenants, such as logistics and engineering groups, become more aggressive with their expansion needs,” Colliers analysts said.
Colliers has offices in Arkansas in Little Rock and Rogers, and is part of the company’s global network of 400 offices in 65 countries.
Food and Beverage Winners
Two small Northwest Arkansas businesses, a bakery and a flower farm, each took home $5,000 in a pitch competition for food and beverage companies and businesses that strengthen local supply chains.
Tyler Hopwood of Hopwood Breeds in Fayetteville and Kayla Crowe of Mount Olive Farms in Graphite won the playground competition last month hosted by the Corias.
Hopwood makes naturally leavened artisanal bread offered through pop-up sales in the Northwest Arkansas community and plans to start a subscription service. Mount Olive is a choose-your-own flower business that promotes sustainability through regenerative farming practices.
The $600 community prize has been awarded to Jesus Rodriguez, of Mingo’s Tex Mex BBQ.
“Their passion, creativity and dedication to their craft are truly inspiring, and we look forward to seeing their businesses grow and positively impacting the local food and beverage industry,” said Kim Bryden, founder of Cureate, of the winners.
A women-owned company, Cureate works with small food and farm business owners to develop new sales channels and enhance marketing efforts.
Financial contributions for the event were made by Forge, a revolving community loan fund based in Huntsville, the Walton Family Foundation and the US Small Business Administration.
NEA training
Small businesses in Northeast Arkansas can take advantage of free courses this month that focus on business planning, financial analysis, market research, loan proposals, growth marketing, expansion, and profitability.
Three sessions are scheduled this week with the fourth session on May 23 and being hosted by the Arkansas Small Business and Technology Development Center at Arkansas State University. Participants can also meet with business advisors at the center to gain insight into starting a business and helping it grow.
The Tuesday session focuses on starting a business and will be held from 10 a.m. to noon in Walnut Ridge at the Lawrence County Chamber of Commerce. The counseling will be 109 SW Front St.
Counseling sessions for starting a business will also be held from 10 a.m. to 3 p.m. Tuesday at the Truman Administrative Complex, 825 Ark.463 North.
Paragold will be located for the same training from 10 a.m. to noon at the offices of the Regional Chamber of Commerce, 300 W.
The final session, from 10 a.m. to noon on May 23, will focus on small business finance at the Delta Center for Economic Development at Arizona State University in Jonesboro.
Sessions are free, but registration is required by calling (870) 972-3517.
Tips for buying a home in the spa town
Hot Springs homebuyers, especially those in the market for the first time, can gain insight into the process, including details about applying for a loan and the financial requirements needed to succeed.
The session is from 1:30-2:30 p.m. Saturday at the Garland County Library, 1427 Malvern Ave. , free and open to the public. The symposium will be hosted by Simmons Bank, Garland County Habitat for Humanity, and ABI Insurance.
There is no registration but attendance must be in the library by 1:30pm
said Patrick Pressley, community affairs officer at Simmons Bank.
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