Commercial real estate firm Colliers Arkansas said the retail sector continues to show signs of post-pandemic recovery in the state’s largest metro. The firm’s latest quarterly report also revealed that the industrial market is stabilizing, and small office sales remain popular.[The third quarter] showed many signs of stability and improvement for the Little Rock metro commercial real estate market,” Colliers analysts wrote. “Vacancy rates held steady across all sectors this quarter, with retail showing the most improvement.”
The retail market vacancy stood at 5.4% in the third quarter, down from 10.1% in the fourth quarter of 2022. Restaurants and entertainment facilities are contributing to the vacancy rate drop.
“It’s a great pandemic recovery signal for our market,” the report said. “Second-generation restaurant spaces aren’t staying on the market long, and there’s not much inventory currently available. Tenant improvements are expensive, so finding a space with an existing kitchen in place is helping those buildings stay full. But landlords have also lowered rates]slightly to help offset [tenant improvement[ costs for spaces in ‘cold shell’ condition.”
Office vacancy rates rose slightly in the quarter to 10.9%, up slightly from 10.8% in the second quarter of 2023.
“Smaller office sales are still proving more popular while larger tenants remain scarce across all submarkets,” the report said. “Tenants are realizing that [tenant improvement] and construction costs are continuing to make the cost of moving too high, so they are staying put a little longer. And with the office/work-from-home hybrid policies still not set in stone for most businesses, renewals remain short-term.”
Industrial has stabilized following its meteoric rise during and immediately following the pandemic.
“Vacancy rates for Q1 and Q2 remained at 3.2%, and we’ve only seen a slight uptick to 3.4% in Q3,” the report said. “Flex vacancy rates are down slightly from 7.4% to 6.4% this quarter. The smaller industrial/flex spaces are still leasing steadily, but we are seeing a slowdown in larger spaces. Industrial speculative development is paused as some new spec remains unused.
According to Colliers analysts, notable construction projects for the quarter include:
- the Arkansas Symphony Orchestra’s 20,000-square-foot new facility in the East submarket which broke ground in August.
- the 1.2 million-square-foot Dollar General warehouse/distribution facility near the Galloway Exit in North Little Rock to be completed in 2024.
- the transformation and unveiling of George’s in the Heights (formerly Café Prego).
- the planned $35 million restoration of the historic Boyle Building downtown, also set for completion in 2024.