Downtowns Provide Bargain Lease Rates

As cities try to lure restaurants and retail downtown, Bentonville and Rogers have the same problem — not enough space to meet demand. And much of what is there is occupied by offices, leaving less room for entertainment venues that could attract more tourists.

Area property owners and civic organizations indicate that occupancy rates in downtown buildings are holding steady at more than 90 percent.

It appears downtown tenants are getting more bang for their buck than their neighbors along the Interstate 540 corridor.

Developer Collins Haynes said his leasing rates have held steady at $12 per SF per year since he opened his renovated Harris Bakery Building project for rent in 1994.

Compare that to retail property he owns near I-540 and New Hope Road in Rogers. Highway frontage there leases for $20 per SF.

Marge Wolf, executive director of Main Street Rogers, said downtown lease rates in her city average $8 to $12 per SF.

“Downtown is attractive to a lot of people, particularly to local retail,” Haynes said.

Carly Fisher, owner of Bath Junkie, said that when she moved her store a year ago from a retail space off I-540 in Rogers to its current location off Central Avenue in downtown Bentonville, she saw an immediate 20 percent increase in traffic. Fisher said she also pays several dollars less per SF compared to the highway location.

In downtown Bentonville, occupancy rates are up about 40 percent from where they were a decade ago, said Johnny Haney, who along with partner John Tate owns nine buildings in downtown Bentonville.

Haney estimates the partnership has spent at least $1.3 million in interest costs in the 15 years they’ve acquired buildings in downtown Bentonville.

“What we’ve spent on renovations and interest and repairs has been more than our revenue has been in the last 15 years,” Haney said.

Haney has his own separate business and Tate is a retired lawyer and board member for Wal-Mart Stores Inc.

Being eight blocks from the Wal-Mart’s home offices helps.

Haney said his pitch to potential tenants starts with downtown Bentonville’s easy access to Wal-Mart

“Many people that open an office on [Interstate] 540 are challenged because it takes 30 minutes to get to the home office,” Haney said.

The downtown area offers an unmatched flavor that strip centers cannot, he said. The price is also reasonable.

In downtown Rogers, rents can range from $8 to $12 per SF annually, Wolfe said.

“We think that the market is a $15 to $18 market,” Haney said. “In downtown, we tend to be in the $12 to $15 [per SF annually] range.”

Haney said he has space that rents for lower than $12 per SF.

Developers can also get tax credits for renovating historic buildings, Haney said, which helps offset what would be higher rents.

Incentives

Bart Allard, partner in Lundy Allard & Co. of Rogers said developers could get a one-time Rehabilitation Investment Credit on historic renovations for federal income tax purposes. The credit equals 20 percent of qualified rehabilitation expenses for certified historic structures, Allard said. If the building is not certified historic, then developers can still qualify for a 10 percent credit for buildings placed in service before 1936.

Developers are also exempt from paying imposed impact fees within the Bentonville Downtown Redevelopment District that was established in 2000. Annette Brightwell, special projects manager for the city of Bentonville, said that the savings for a 25,000-SF or less office building would probably be about $27,000, which includes fees for fire, water and sewer. The district boundaries run from N.W. 7th Street to the north, S.W.14th Street to the south, S.E. “J” Street to the east, and South Walton Boulevard to the west.

Arvest Bank-Rogers is one of nine Rogers banks that participates in the Renewed Preferred Loan Program. The program has been in existence in various capacities through the Main Street Rogers organization for the last 15 years, said Rob Brothers, president and CEO of Arvest Bank-Rogers.

Downtown owners are offered a preferred fixed-prime rate and term, which is locked in at the time of the loan, Brothers said. The interest rate is locked in for two years and after that, the loan re-prices on an annual basis.

Brothers said the program was used heavily 10 to 15 years ago, because several downtown renovations began during that time. A participating bank gets the referral for a potential client, Main Street Rogers ensures the client meets its qualifications and issues a recommendation to proceed with the loan. The client still has to meet certain credit requirements.

Brothers estimates that the top 25 percent of buyers qualify regularly for prime rate loans.

“It’s different [renewed preferred] because they may or may not automatically qualify for prime rate financing,” Brothers said.

Future

Architect and developer Harrison French said he thinks Bentonville will see more projects downtown. He plans to build six condos off Main Street this summer.

“We are just trying to create that mixed-use pedestrian-friendly environment that is important to downtown,” French said.

In the last two years, French developed two 20,000-SF-plus buildings off S.W. “A” street in Bentonville.

“We are probably the best-known small town in the world,” French said. “We just have to be the best small town.”

A 2004 Downtown Master Plan study indicated that 23 percent of Bentonville residents live downtown. The study cited the lack of night-time activities as a deterrent to businesses and residential development downtown.

But things are looking brighter.

“The retailers we’ve had downtown say they are having the best retail year they’ve ever had,” said Bob Haynes, director of Main Street Bentonville. Other downtown tenants, such as Overstreet’s Jewelry and Arvest Bank Bentonville, are both undergoing renovations.

Grant Harasyn, founder and CEO of Vendor Partner, will be moving into the 3,600-SF building off West Central Avenue that housed the “Black’s Ready To Wear” dress company 40 years ago.

Harasyn said he’s committed to the Main Street Bentonville initiative. His vendor services firm will occupy the first floor of the circa-1903 building and he plans to renovate the upstairs into living quarters. A rooftop garden, he said, is not out of the question.

“I’m hoping to help bring business back downtown, literally,” Harasyn said.

Harasyn joins other new downtown tenants such as Cameron Smith & Associates and the McIntosh Group, whose retro-style shared office space includes black hardwood floors and purple ceilings.

Smith, who became Haney’s tenant in June, said being downtown was the right fit.

“Doing what we do, recruiting vendors, we can’t be in the vendor parks,” Smith said.

Programs

Both Bentonville and Rogers are two of 18 designated Main Street Arkansas communities statewide. Rogers’ program was founded in 1984, when Main Street Arkansas was founded. Bentonville started in 2003. The Main Street organizations function as non-profits with the goal of stimulating economic growth and historic preservation in downtown areas.

The state Main Street department distributes competitive grant money to assist Main Street business owners, and offers free consultation from its staff. Greg Phillips, assistant state coordinator for Main Street Arkansas, said it now requires a town the size of Rogers or Bentonville to have a minimum of more than $50,000 per year to fund a Main Street organization. All of that funding is secured locally, and the budget amount changes with every application period.

Phillips estimates that Main Street Arkansas gave out $100,000 in 2004 for model business grants. Main Street has administered $2.4 million in grants the model program started in 1991. Main Street Rogers has received a combined $64,000 from that program since 1991, which included contributions towards projects like the Rogers Little Theatre and White’s Jewelry & Estates. Both Bentonville and Rogers offer $1,000 grants to downtown business owners to help with the restoration of historic facades. Main Street Arkansas is operated through the Arkansas Historic Preservation Program.