The reaction to the Sept. 15 announcement by Wal-Mart Stores CEO Doug McMillon that the company was going to invest in a new home office campus in Bentonville has been widely greeted as good news.
Good news is one thing. Dollars and cents is more tangible data, and one real estate executive in Northwest Arkansas says Wal-Mart’s commitment will have a long-term ripple effect on the regional economy.
“I expect Wal-Mart’s investment to be close to, on a guesstimate, a billion dollars,” said Paul Esterer, a principal and managing director of commercial real estate firm Newmark Grubb Arkansas (NGA) in Bentonville. “That’s one thing. The second part is it will solidify future development of another $500 million in investments in Bentonville. It sounds like a big number, a half a billion dollars. It could be a shocking number. But in reality, based on what is happening in downtown Bentonville, there’s that much on the drawing board. And from a diverse group of investors.”
Esterer estimated the related infrastructure spending to support future real estate investment could be another $250 million.
Wal-Mart’s new corporate campus will be built on the east side of Southeast J Street, bordered by Arkansas Highway 102 to the south and Arkansas Highway 72 (Central Avenue) to the north, and Southeast Eighth Street dividing the property. The total footprint is about 350 acres.
While some buildings will be razed, there are already several Wal-Mart-owned buildings already on the site. Most of them were once Wal-Mart warehouses that have since been converted for a variety of uses (associate store, layout center, employment center, office space, etc.). There’s also a large amount of property used for trailer parking and truck maintenance.
The new home office will be reconfigured and built in phases, and the company said it believes planning and construction should take between five and seven years to complete. There are no immediate plans for a groundbreaking. Esterer said that timeframe could be accomplished, but he believes seven to 10 years may be a more realistic schedule.
“I just think there’s a lot to get done,” said Esterer, who has led NGA’s representation of the Walton family in several Bentonville real estate acquisitions in the past. “With the infrastructure around it, and what has to happen with the Eighth Street widening project, it’s just a lot of projects. It’s a lot of square footage. And it’s a lot of people to move and reposition. I think patience for everyone will be important.”
Wal-Mart corporate spokesman Randy Hargrove said in the footprint of where the new campus will be built there are about 5,000 employees.
While retail insiders largely applauded Wal-Mart’s plans to build a new headquarters in Bentonville, they also questioned the timing of the announcement, which fell on the heels of Amazon’s news it was scouting North America for a suitable site to build a second corporate headquarters.
Hargrove said the timing of Wal-Mart’s announcement in relation to Amazon was merely coincidental. He said some home office buildings are reaching the end of their lifespan, and it was time to make an announcement about the retailer’s future plans.
Stewart Samuel, an analyst with IGD, a food and consumer goods research organization, believes Wal-Mart’s announcement was coincidentally timed with Amazon, and the bigger issues are the long-term benefits for Wal-Mart. He said the retailer’s decision to build new in Bentonville is a vote of confidence for the region. He said anyone who has spent any amount of time in Bentonville traveling between Wal-Mart’s network of offices highly welcomed the news.
Wal-Mart has been acquiring land for the new headquarters for some time, and when asked about the purchases in July the retailer gave no indication of future plans. But as soon as Amazon began grabbing headlines regarding its second headquarters to be built outside of Seattle, Wal-Mart made a short announcement of its own plans, but provided no real details to go with a lengthy project timeline of five to seven years.
Keith Anderson, vice president of strategy for Profitero, said Wal-Mart was perhaps not ready to announce its plans, but saw the public perception of Amazon’s growth fueling the need for a second headquarters and thus decided to show its own hand. He said the five-year time frame is long, but this will no doubt be a large undertaking. And it will also give Wal-Mart time to study and plan in a vacuum.
“This will also be capital intensive, and investors might not approve. So spreading the cost over five to seven years likely makes it more acceptable by Wall Street,” Anderson said.
‘SET THE STAGE’ FOR TECH TALENT
Clint Lazenby, founder of #OnShelf, a retail consulting firm in Bentonville, also wondered why Wal-Mart announced so soon after Amazon. He said the company could have told shareholders in June, or saved it for the company’s annual analyst meeting on Oct. 14. He said it’s more likely Wal-Mart rushed out a brief statement long before they were ready to talk about their plans, just so the public perception would not be that Amazon was outdoing them.
Lazenby and Anderson each said the news of a more modern home office is good for the company long-term, and they aren’t sure why Wal-Mart rushed out a short statement with no details and left more questions to answer. They each agreed there is a talent war at hand, and a more modern home office, if done right, will likely help Wal-Mart do a better job with talent retention in the future.
Carol Spieckerman, CEO of Spieckerman Retail, said she wouldn’t necessarily equate the timing of Wal-Mart’s announcement with Amazon’s revelation of a second headquarters.
“However, it is prudent of Wal-Mart to get the word out sooner than later in order to set the stage for better recruiting, particularly tech talent, and to send a beacon of hope to current employees,” she added. “The hodgepodge of buildings — some OK, others depressing — that comprise Wal-Mart’s ‘headquarters’ send an inconsistent message about working environment, collaboration and employee well-being and engagement.”
Spieckerman said the announcement holds promise that Wal-Mart will clean everything up and ideally put it on par with other multi-national companies — if not attempting to go neck-in-neck with perk-heavy competitors in the tech world.
“Wal-Mart has one chance to do this right and to signal its expectations for future success and competitiveness in the process,” she said.
Alan Ellstrand, a professor at the University of Arkansas with expertise in corporate leadership teams, suspected Wal-Mart and its competitors do keep a close eye on one another, and Wal-Mart may have known about Amazon’s plans even before they were announced.
“Regardless, Wal-Mart had no real timeline constraints to announce their plans as it’s a long-term project,” he explained. “I think making the announcement was just as much about Wal-Mart saying it plans to be around 50 more years. This is a huge for Northwest Arkansas as retail continues to evolve. It will be fun to watch this project develop in the coming months, and the employees have to be excited about the possibilities.”
Northwest Arkansas Business Journal Editor Paul Gatling contributed to this report.