Realtors, Data Report Hot Industrial Sector of Local CRE Market

When Xceligent Inc. issued its first-quarter report for the Northwest Arkansas commercial real estate market, Marshall Saviers, a broker and partner with Sage Partners in Fayetteville, was not surprised at the details.

“The activity that’s hot right now is in the industrial space,” Saviers explained. “And the numbers reflect that.”

After a survey of about 27.5 million SF, Xceligent reported the vacancy rate among industrial properties in Northwest Arkansas stood at 5.7 percent through the first quarter this year.

Xceligent is a national real estate data company headquartered in Missouri that tracks office, retail and industrial space in Northwest Arkansas and about 40 other markets.

The Northwest Arkansas market includes 10 submarkets — East Rogers, West Rogers, East Springdale, West Springdale, South Fayetteville, North Fayetteville, West Fayetteville, East Fayetteville, Fayetteville Central Business District and Bentonville.

The collective 5.7 percent figure represents a significant decrease from the 8.2 percent vacancy rate that was reported in the first quarter of 2012.

It is also well below the national average of 9.6 percent, as reported by the National Association of Realtors.

In the office sector, the vacancy rate through the first quarter of 2013 stood at 9.8 percent, down from 12.1 percent.

In the retail sector, Xceligent data showed a 6.8 vacancy rate, down from 8.4 percent in the first quarter of 2012.

While all three sectors remain active and are performing better than the national average, the industrial segment’s performance the last 12 months is causing the most optimism among CRE professionals.

In a February 2012 report in the Northwest Arkansas Business Journal, Pat Morrison, principal broker-owner at Morrison Wanger Adams in Rogers, called 2011 “a dark year” for industrial activity.

The improvement can be tied to a variety of factors, including the vendor community serving Wal-Mart Stores Inc., organic growth from local companies and a growing number of entrepreneurial and technology ventures.

“We are seeing some diversity,” said Brian Shaw, managing partner at Sage Partners. “But I think part of that has to do with the area’s infrastructure.
It’s getting better and people can see there will be easy ways to get product in and out of here. The area’s just growing.”

Sage Partners has been involved in several of the larger transactions completed in the last 18 months.

Shaw helped broker a lease agreement earlier this year that moved Fayetteville-based e-commerce firm Acumen Brands out of a 50,000-SF space into just under 129,000 SF in a combination of two buildings in the Magnum Industrial Park on North Shiloh Drive.

“To grow that quickly and expand that fast is not the ordinary,” Shaw said. “But they are a great example of a company growing through the downturn.”

That transaction helped cut the vacancy rate in West Fayetteville in half, down to 12.5 percent. That’s the highest rate among the 10 submarkets.

Another deal brokered by Sage Partners that helped the industrial sector in 2012 involved Colorado-based Kärcher North America Inc., which bought 46.74 acres and a 661,000-SF warehouse/office space at 2700 S. Armstrong Ave. in Fayetteville.

The sale-leaseback deal that closed in May tipped the scales at $11.5 million, and lowered South Fayetteville’s vacancy rate from 9.3 percent in the first quarter of 2012 to 2.7 percent in the first quarter of 2013.

Warehouse expansions in Springdale involving Harps Food Stores Inc. and Rockline Industries were also significant, Saviers said, totaling a combined 100,000 SF.

“I think [companies] see that there isn’t a lot of quality space left,” he said. “Getting to a 5 percent vacancy, you don’t have a lot of options. Once some of their competitors or others in the market start moving around, it creates some velocity.”

Shaw added the industrial activity has been pretty evenly distributed between Benton and Washington counties.

He noted an agreement between NextLife Asset Recovery Services and a building owner at 1300 N. Dixleland Road in Rogers to occupy 252,000 SF for its corporate headquarters and processing plant.

In total, in the last five quarters, the Northwest Arkansas market has absorbed 311,339 SF of industrial space.

“There was more product in Washington County available, so probably more absorption there,” Shaw said.