Areas Largest Office Park Sees Leasing Uptick

Almost two years into new ownership, Northwest Arkansas’ largest office park is seeing a steady uptick in leasing activity.

Beau Terre, which opened its doors two decades ago as the first office park specifically for vendors to Wal-Mart Stores Inc., is in Benton County just off Interstate 49 in Bentonville, intersected by Arkansas Highway 72.

Colliers International principal Butch Gurganus, who is the leasing agent for the 35-building, 383,000-SF office park, said the complex is currently 65 percent occupied.

That’s up from 53 percent in September 2014, when the 79-acre property was bought for $21.75 million by Granite Beau Terre Holdings LLC, an investment group managed by Sabal Financial Group LP, a Los Angeles-lender and distressed-debt investor.

Gurganus said another 18,000 SF in leases would put Beau Terre at 70 percent occupancy, a possibility by the end of the year.

Tenants will find lease rates starting at $15.75 per SF for Beau Terre’s Class B office buildings, about 50 cents cheaper than comparable space in the market, Gurganus said.

Some 77,618-SF of new leases have been closed in Beau Terre since the office park went under new ownership, in the form of renewals (17,685 SF) or expansions (12,648 SF) for existing tenants, or leases for new tenants (47,285 SF).

 

Beau Terre Benefit

Gurganus said “about 95 percent” of the office park’s 72 tenants are Walmart suppliers, anchored by ConAgra Foods Inc. (28,000 SF), The Scotts Miracle-Gro Co. (10,248 SF) and Hanesbrands Inc. (10,172 SF).

Job number one for them is calling on the world’s largest retailer, which is why Beau Terre’s location is a benefit for the people who work there.

Bentonville’s ever-present traffic congestion can be a hassle for vendors crisscrossing town between key locations of the Walmart corporate landscape.

Any advantage is a good one for companies looking to alleviate drive-time aggravation for their employees.

 “It depends on the tenant,” Gurganus said. “For example, we have a lot of apparel tenants in the park. They like the proximity because it’s not a traffic issue to get to the [Walmart] layout center on Central [Avenue], or the buyer can get to their office without much traffic. This is about the closest office park to the layout center. There are other offices that are adjacent to it, but they’re full.

“It’s a location thing for some tenants. For some it’s the price. Some I guess it could be both.”

 

New Owners

Beau Terre was developed and opened in October 1994 by former Walmart executive Colon Washburn and his wife, Dana Washburn, who also spent several years in merchandising, working for Sam’s Club.

They later sold the development in June 2004 for $56.2 million to Behringer Harvard Funds of Dallas. Sabal bought the office park from Maryland-based CWCapital Asset Management, a special servicer that took the title of the property in the fall of 2011 in a foreclosure sale after Behringer Harvard defaulted on a $33 million loan tied to the property.

Beau Terre’s occupancy when transferred to CWCapital was 42 percent, according to a May 2014 report by Moody’s Investors Service.

Sabal Financial did not provide a comment for this story to the Northwest Arkansas Business Journal. Gurganus, though, said the new owners have invested an undisclosed amount on capital improvements, primarily exterior and landscaping upgrades. Roofs have been replaced on two of the buildings.

“They are the first [owners] who have been able to spend money on the park since the original owners,” Gurganus said. “Under Behringer, the market tanked, they were under water, couldn’t spend any money on it. When CW bought it, they spent some, but they were just trying to get it ready to sell it.”

Beau Terre also has onsite conveniences for tenants to take advantage of, including a daycare and fitness center, hotel and restaurant.

 

Regus Doubles Down

One of the biggest tenants at Beau Terre is also one of the newest.

Regus, the world’s largest provider of shared office space, signed a long-term lease for 14,000 SF and moved in May 16. Only ConAgra Foods occupies more space at the office park.

Julie Helgestad, a Regus area manager, said the occupancy rate at the Beau Terre center is about 30 percent. She said the success of the company’s initial Bentonville location necessitated the second site in Benton County, where demand for office space is growing.

The multinational company based in Luxembourg opened in Bentonville in 2007 in 15,700 SF of the Bentonville Plaza building at 609 S.W. Eighth St., across the street from the Walmart headquarters.

Bentonville Plaza is managed by Sage Partners of Fayetteville.

“We’ve stayed fully occupied at that center for several years,” Helgestad said. “There’s just such a high demand for office space for people that are working with Walmart.”

Regus offers customizable workspaces for businesses and professionals working temporarily in the area. The firm typically leases large office spaces, then sublets furnished offices, meeting rooms and lounges, monthly, daily or even hourly.

Helgestad said it was difficult to offer an apples-to-apples comparison of rental rates at the two Regus centers, because of variables in lease terms and amount of space.

She did quote a rate of $350 per month for a one-person interior office at Beau Terre, compared to roughly $1,000 per month for a two-person interior office at Bentonville Plaza. Both figures are based on a 12-month lease.

Besides being more cost-friendly for smaller businesses, Helgestad agreed with Gurganus’ opinion that Beau Terre may also be preferred over Bentonville Plaza simply because of its proximity to the interstate.

“We can offer lower prices for tenants that don’t necessarily need to be right across from Walmart, but want to be in the vicinity,” she said. “It’s really handy for people who are traveling from Bella Vista or Fayetteville or other areas who don’t necessarily need to go through the middle of Bentonville and get caught up in the Walmart traffic in the middle of the day.”

Gurganus hopes Regus’ presence will work as an incubator to drive up the occupancy rate at Beau Terre. Businesses do not theoretically sign multi-year leases with Regus, he said, and if existing companies decide to grow their local footprint in Benton County, they will already be familiar with the office park as an option for expansion.

A prime example of that type of spinoff can be found at Bentonville Plaza, where TaTa Consultancy Services, an IT services, business solutions and outsourcing organization based in India, has occupied the entire ninth floor since signing an eight-year lease agreement in 2013.

Helgestad said the company’s initial presence in Bentonville Plaza several years ago began in Regus space.

“[Regus’ presence] will drive more traffic through the park,” Gurganus said. “And the companies that are already here, they’re here because they like the location. When they add [employees] and need to expand, hopefully they’ll stay in the park.”