Jonesboro is nearing record permit numbers, but a construction decline is possible

Jonesboro is poised to set its all-time building permits record in 2018 fueled by expansions by St. Bernards Healthcare and the hotel/convention center project on the Arkansas State University campus.

The city has issued $245.5 million in permits through mid-September, and the only time the city has ever topped $200 million was in 2011 when it issued $273.17 million, in part because NEA Baptist began building its new hospital.

Josh Brown, Haag Brown Commercial principal broker, said he thinks there could be a commercial permit decline in the coming years, but Jonesboro will still remain the economic hub in Arkansas Delta.

“We’ve been fortunate … during the last several years there has been a lot of expansion in our market,” Brown said. “Interest rates have been at historic lows for years. A lot of people with money to invest were encouraged to buy real estate and construct buildings with the rates so low.”

FUELING GROWTH
Rapid commercial growth in the city of about 76,000 people began in earnest about 12 years ago when the Mall at Turtle Creek was built on Red Wolf Boulevard, not far from the Arkansas State University campus. It was the last enclosed mall built in the United States, according to Gary Harpole, Halsey Thrasher Harpole Real Estate Group managing partner.

Before that, many businesses clustered on Caraway Road near the former Indian Mall. After the new mall opened, many local and national businesses started to flock onto Red Wolf, Harpole said.

Growth in that part of the city was propelled in 2014 with the opening of NEA Baptist Hospital. The $400 million hospital initially provided 180 hospital beds. By 2017, it ballooned to 228 beds, and there is room to expand by another 72 beds.

When the campus was first built, it was one of the largest private capital projects in state history in terms of dollars spent. Each day the hospital serves an average of 125 patients in its emergency room. The hospital’s beds are nearly filled to capacity each day, and more than 500,000 patients are treated each year in the Health System’s clinics. The construction and opening of the hospital attracted a number of other businesses to U.S. 49.

FACTORS SLOWING GROWTH
A combination of factors could lead to a slowing commercial market, Harpole said. Interest rates have crept up by 1.5 points this year, and if they continue to rise it could stop or delay projects, he said. Unnecessary regulations, new fees and zoning issues could also stymie growth, Harpole said.

Many national big box retailers such as Kmart, Books-A-Million shuttered operations in Jonesboro. Several of those closed buildings are in prime locations, and new retailers will likely repurpose those buildings instead of breaking ground on new ones, Brown said.

Development along Red Wolf and U.S. 49 has slowed in recent years as the market in those areas is filled to capacity, Brown said. New commercial real estate development in Jonesboro will occur at several other pinch points in the city, including the intersection of Highland Drive and Caraway Road. The former Indian Mall and the former Kmart building are in that area, and it will be a prime place for restaurant and retail growth, Brown said.

Parking lot space in that area also could be transformed into parcels or pieces of commercial real estate that are located in front of larger developments such as a mall or grocery store. The outparcels can be used for smaller retailers, restaurants and other types of businesses.

During the next 10 years overall retail and office space will likely decline, Brown said. Online shopping will negatively impact brick-and-mortar operations, and there will likely be less big box businesses locating in Jonesboro, but regional businesses will continue to come to the region’s hub city, he said.

Millenials don’t prefer the large offices of past generations and many of them work from home, which will lead to a decline in office space, Brown predicted. One area expected to grow is medical office space. As the Baby Boomer population ages, medical office space will be needed, Brown said.

There may be fewer “super projects” in Jonesboro during the next decade, but Harpole also expects growth with regional retailers. He agreed with Brown that growth along Red Wolf will decline simply because it has already had so much growth. Harpole also agreed that spots such as the confluence of Highland Drive and Caraway Road are the prime commercial real estate expansion spots in the city. There are efforts underway to develop the downtown area, too, he said.

“I think we’ve been on a good run. … I think we’re still in an aggressive market,” Harpole said.

THE GREENSBOROUGH PROJECT
Harpole’s company is involved in one of the most ambitious projects in the region’s history, Greensborough Village. Greensborough Village will combine retail, commercial, office and other spaces with residential development. The Village is modeled after similar developments in Franklin, Tenn.

When it’s completed, there will be at least 650,000 square feet of commercial/retail space, and more than 200 single-family homes. It’s estimated up to 2,500 people will live in the village once completed, Harpole said. It’s expected to cost at least $500 million.

“It’s a city within a city,” he said. “It’s a master-planned community. There’s a tremendous amount of thought and coordination put into this.”

At least 15% of the acreage will be dedicated to green space, Harpole said. Two main roads will cut into the development from U.S. 49, and another road will be cut into the project from Arkansas 351, according to plans filed with the city. A project of this magnitude has several unique challenges, Harpole said. The project could possibly go vertical this year.

The jobs market has been strong in Jonesboro and earnings have been on the rise. Jonesboro remains a medical, shopping and entertainment destination for those who live outside the city in the region. Growth may slow, but it probably won’t stop, Harpole said.