Plaza Not Too Posh

In most cities, Bentonville Plaza would be considered an average building, but in the town Sam Walton built, it’s a nine-story skyscraper towering over the squat and austere headquarters of the world’s largest company.

“This is nothing more than a red brick office building,” said Tommy Van Zandt, division partner with Irwin & Saviers Co. of Little Rock, the real estate broker working to lease the 261,000-SF structure.

“In any other market, this building would be very standard,” Van Zandt said. “Nobody would pay any attention to it. There’s no granite on it and no reflective glass … It’s got terrazzo floors. Terrazzo floors are in every post office built since World War II.”

Van Zandt seems exasperated with the press. Reporters keep asking if the building scheduled to open on August 1 will clash with the corporate culture of the community it was built to serve.

In a word, his answer is “No.”

“I just don’t understand why this moniker has been put on this building,” he said. “We’re all out for the same goal — to create a business atmosphere that is more productive for everybody … You talk about the efficiency of time and the cost savings for everybody, it’s a no brainer.”

Since Walton died in 1992, the company he founded in Bentonville has grown to be the largest on Earth with $256 billion in net sales last year. Mr. Sam’s 1979 red Ford pickup truck isn’t in the parking lot anymore, but some fancy foreign cars are as Wal-Mart Stores Inc. welcomes the world to its hometown and re-examines its Spartan roots.

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Built for Vendors

Four years ago, FBE of New York City, which owns Bentonville Plaza, bought a neighborhood of houses across Eighth Street from Wal-Mart’s home office. The houses were razed, and construction began on Bentonville Plaza in May 2003. Pitcairn Properties Inc. of Jenkintown, Pa., is the developer. The building was designed by Sydness Architects of New York City in collaboration with Harrison French of Bentonville.

Van Zandt said he doesn’t know the total cost of the Plaza project, but estimates from elsewhere have put it at more than $30 million.

The smallest offices available at Bentonville Plaza are 1,500 SF. At the other end of the spectrum, Van Zandt said he’ll rent offices “as big as you want to get.” The minimum lease rate at Bentonville Plaza is $19 per SF per year, which amounts to $2,375 per month for a 1,500-SF office.

When completed, Bentonville Plaza will have state-of-the-art security, data and telecom services (including fiber-optic cable), according to a brochure from Irwin & Saviers’ Springdale office, where Van Zandt works. The building will also have expandable nine-foot ceilings on eight floors with 12-foot ceilings on the ninth floor, which will consist almost entirely of meeting rooms.

Bentonville Plaza will offer a wide range of amenities tailor-made for vendors, from a concierge at the front desk to a loading dock in the back and a freight elevator in between.

Other amenities include a restaurant, fitness center, “sundry store,” airport shuttle service, golf-cart transportation to Wal-Mart’s home office and a business center with shipping services like a UPS Store or Mailboxes Etc.

“This area from a business perspective was in its infancy until the last few years,” Van Zandt said. “The business community has matured and escalated to the point where the businesses involved have quite a few needs for different services.

“Let’s face it, the space demand for the vendor community is growing. Why put yourself in a building you’re going to grow out of? I’ve never seen a building that meets the needs of the business community better than this one.”

At least 200 Wal-Mart vendors have opened offices in Northwest Arkansas. Procter & Gamble has the largest local presence with more than 200 employees in its Fayetteville office. About 500 vendors call on Wal-Mart each weekday, adding up to more than 90,000 vendor visits per year.

Van Zandt notes that Wal-Mart vendors have leased space in fancier buildings, like the granite-floored J.B. Hunt Parkway Tower in Rogers. But it’s the proximity of Bentonville Plaza that makes it more noticeable and certainly more convenient.

Vendors will be able to walk across Eighth Street from Bentonville Plaza to pitch products in one of the 80 small vendor rooms at Wal-Mart headquarters, and Wal-Mart buyers can stroll the other direction to examine items in vendor showrooms at Bentonville Plaza.

“You’ve got all these companies that are here now and relocating here to do business with one of their, if not their, most important client,” Van Zandt said. “So why not position yourself to do business in the most efficient manner possible? Why not be in Bentonville? Why not be within walking distance to your main client?”

Sustaining Culture

Johnnie Roebuck, an expert of Wal-Mart culture at Henderson State University in Arkadelphia, said she doesn’t think Mr. Sam would look down on the tall building next door to the single-story warehouse complex that houses Wal-Mart’s home office.

“This to me is just an expansion of the old vendor fair,” she said. “It’s just not sponsored by Wal-Mart.”

The difference is between opulence and comfort, said Roebuck, who is coordinator and professor of education leadership at Henderson State. It sounds like Bentonville Plaza will be a comfortable, rather than opulent, place to do business, she said.

“The culture said the people are important, not the place,” Roebuck said.

But Wal-Mart as a company is going through growing pains, she said, citing the hiring of an image consultant last year and problems putting stores in Los Angeles and Chicago.

“They’re in flux,” Roebuck said. “Their culture is strong, but they’re not sustaining it. There are so many people coming in … A lot of people don’t even hear the stories anymore.”

Sam Walton opened his first dime store in Bentonville in 1950. He opened the first Wal-Mart store in Rogers in 1962.

After Walton’s death, Don Soderquist became the company’s culture crusader until he retired in 2000 from his 20-year Wal-Mart career.

“Their vision,” Roebuck said of Walton and Soderquist, “was that they were a part of the community and the people, and they wanted to give back to the community and not rise above.

“Now, [Wal-Mart has] become so vendor centered, and I think people don’t understand that.”

Although Roebuck believes the Wal-Mart culture is still strong, she said she worries that Wal-Mart executives might fall into the habit of picking and choosing only parts of the culture they want to live and work by.

“I think the people who currently are there, some in high positions, don’t see the benefit of the culture unless it’s convenient,” she said. “Then they say, ‘Well, that goes against our culture.'”

Touch-and-Feel Market

As of June 1, 31,000 SF of Bentonville Plaza’s 261,000 SF of space had been leased. Van Zandt wouldn’t say who the tenants are, but he’s not worried that more haven’t signed leases yet.

“It’s just the nature of this market,” he said. “The needs of the vendor community change so quickly, so the need to delineate the square footage can vary.”

“Overall, it seems like they’re ahead of the curve by having anything leased,” said David Erstine, vice president of Real Estate Market Data Inc. of Springdale. “It seems like we have a touch-and-feel market. People want to see it, touch it and feel it before they lease it … It’s not uncommon for property to have no leases signed [when the building is completed].”

Vendors began establishing offices in Northwest Arkansas in the 1990s. Wal-Mart claims it never issued the edict that vendors had to be nearby. Clout and competition seem to have spawned the immigration.

But is Bentonville finally overbuilt?

“It’s supply and demand, balance,” Van Zandt said. “And I think the jury is still out on that.”

With Bentonville Plaza, prospective tenants will have a choice for a change, he said.

“The days of too much demand and too little supply are over, so you’d better have a better product or location,” Van Zandt said.

If all goes well after Bentonville Plaza opens, developers may construct more buildings and a hotel on the same piece of property.

Market Summary

The following is an overview of local office and retail space occupancy rates:

Office Space

• Class A

City — Gross SF Surveyed — Vacant SF — % Vacant — Average Rate SF

Bentonville — 960,290 — 72,600 — 7.56% — $14.95
Fayetteville — 368,083 — 33,589 — 9.13% — $16.19
Lowell — 135,864 — 13,091 — 10.23% — $17.35
Rogers — 706,336 — 118,600 — 16.79% — $17.90
Springdale — 85,000 — 7,616 — 8.96% — $16.79
Total — 2,255,573 — 245,496 — 10.88% — $16.64

• Class B

City — Gross SF Surveyed — Vacant SF — % Vacant — Average Rate SF

Bentonville — 328,141 — 111,632 — 34.02% — $12.22
Fayetteville — 725,787 — 111,493 — 15.36% — $11.94
Lowell — 65,300 — 3,400 — 5.21% — $14.65
Rogers — 330,614 — 37,685 — 11.40% — $8.71
Springdale — 232,815 — 32,118 — 13.79% — $9.66
Total — 1,682,657 — 296,328 — 922.62% — $11.44

Retail Space

• Class A

City — Gross SF Surveyed — Vacant SF — % Vacant — Average Rate SF

Bentonville — 0 — 0 — NA — NA
Fayetteville — 799,157 — 23,065 — 2.89% — $11.04
Lowell — 0 — 0 — NA — NA
Rogers — 416,272 — 7,500 — 1.80% — $13.71
Springdale — 0 — 0 — NA — NA
Total — 1,215,429 — 30,565 — 2.51% — $12

• Class B

City — Gross SF Surveyed — Vacant SF — % Vacant — Average Rate SF

Bentonville — 137,941 — 64,297 — 46.61% — $13.42
Fayetteville — 619,541 — 97,660 — 15.76% — $9.89
Lowell — 0 — 0 — NA — NA
Rogers — 424,000 — 79,470 — 18.74% — $9.68
Springdale — 597,870 — 28,748 — 4.81% — $10.02
Total — 1,779,352 — 270,175 — 15.18% — $10.75

Notes: Figures are based on the market at the end of 2003. Survey excludes buildings that are a combination of retail/office space such as strip centers. NA – Not applicable.

Source: Real Estate Market Data Inc. of Springdale.