Jobs Foretell Boom

Economists, like politicians, can spin statistics like a concrete truck turning its mixture over until it will form into anything.r

Such manipulation may not be needed when looking at a correlation between job growth and commercial building valuations in Northwest Arkansas. The theory, commonly used in more mature markets, is that job jumps “set up” a following year of expanded commercial construction.r

Jeff Collins, director of the Center for Business and Economic Research at the University of Arkansas’ Walton College, said that thinking makes intuitive sense. He cautions that the beginning job base and whether or not a market is already overbuilt are also factors to consider.r

But all things being equal, Collins said it’s probably fair to assume that the 8,700 new jobs added to the local market in 2001 and the 6,200 added in 2002 are a decent barometer that commercial construction will continue to climb. r

The job figures, obtained from the Arkansas Employment Security Department, don’t consider lost jobs. The valuations aren’t adjusted for the price index.r

But both sets of data compare to years such as 1993, when 7,100 jobs were added, and 1994, when 8,400 were added. They were followed by a 25 percent spike in commercial building permit valuations from $94.68 million in 1994 to $118.42 million in 1995 (see chart).r

The values include both commercial and governmental construction, so the $230.26 million worth of new commercial construction in 1999 was probably an anomaly related to the $110 million expansion of Reynolds Razorback Stadium. New jobs had trended down to 3,300 by 1997.r

“When you have big job growth you’ll see investments in capital, usually fixed investments of some kind,” Collins said. “So commercial real estate would make a lot of sense.”r

There’s evidence to indicate the 2001 job resurgence was a signal.r

David Erstine, a market research analyst at Real Estate Market Data Inc. in Springdale, said the delivery of 400,000 SF of new Class “A” local office space from 2002 through half of 2003 is probably the largest addition of its kind. That’s a 23 percent rise from 1.75 million SF a year ago to about 2.15 million SF now. r

Charles Reaves, one of the area’s most respected developers, is building Pleasant Crossing — a 345-acre, planned-unit development off Interstate 540 in Rogers. He agreed job and population growth are good factors to consider, but said he tries to look at the macro-economic picture and five to 10 years down the road.r

“Permits for commercial construction can be misleading,” Reaves said. “In terms of the Pleasant Crossing, I became convinced that the market’s going to expand significantly west to Oklahoma and north toward Missouri. That would give us the opportunity to be the retail center of a much bigger area.”r

Collins said the big question for commercial contractors in Northwest Arkansas is the same as it’s been for several years. Is the market already saturated with office space, or is it still under built?r

“There’s a lot of spec office building going on,” Collins said. “Some people say 80 percent of the vendors to Wal-Mart already have offices here, and some say there’s 80 percent left to come. There’s a lot of folks betting on the ‘come’ right now.”