Central Arkansas office vacancies of 11.3% worrisome, but ahead of U.S.

The U.S. office market has been spiraling in the post-pandemic economy — and the Central Arkansas sector has generally followed national trends but has delivered slightly better vacancy rates.

Vacancies in the Little Rock metro market improved in 2023 though the 11.3% rate remains a concern, according to a recent report from global management firm Colliers. The average national vacancy rate was 13.3% at the end of the year.

More companies are ordering employees to return to the office though that has not led to significant improvements in vacancies, either nationally or locally.

“The metro Little Rock office market continues to buck the dour national office trend of high vacancies, but still remains a market concern,” Colliers’ Arkansas office reported in a year-end analysis of the region’s commercial real estate market for the fourth quarter (Q4).

Local vacancies bumped up from 10.9% in the third quarter but declined from 12.6% to open the year. Tenants remain firmly in control as property owners try to lure employers with added incentives. The work-from-home movement remains a key factor, leading businesses to downsize to smaller offices.

“Office lease rates held steady throughout Q4 even as office users are shrinking,” Colliers reported. “Most potential tenants were touring smaller space at just 3,0004,000 square feet. Higher tenant improvement (TI) costs and moving expenses resulted in some tenants making the decision to remain where they are. However, some saw this as an opportunity to negotiate for other lease upgrades.”

Office-market conditions “merit close attention” this year as property owners are pressured to grant more concessions to draw business occupants. “It’s a tenant’s market without question,” Colliers found.

As the year ended, there were strong indications the retail sector is roaring back from the sharp declines suffered since the pandemic rose nearly four years ago. Retail vacancies fell by about half to end the year, dropping to 4.4% from 8.8% at the end of March and showing improvements throughout every quarter in 2023.

Those improvements have essentially eliminated the availability of empty retail space in Central Arkansas, Colliers says, noting the sector’s “steady recovery” last year.

“While the market is still experiencing some national retail closures, local retail shops are mounting a comeback,” Colliers reported last week. “Restaurants continue to shine within the retail sector. The amount of existing restaurant space available in the MSA [Metropolitan Statistical Area] is effectively [zero]. This prized space is not staying on the market long.”

The retail-and-restaurant rebound also is reflected in statewide unemployment reports. In December, the leisure and hospitality sector was a jobs winner in 2023, adding 3,500 jobs from year

end 2022, buoyed by the 2,700 workers added in food services.

As some retailers or restaurants close down, others are quickly moving into the empty spaces. And the growth in the industry is leading other new restaurants to buy outparcels and build from scratch. “The Central Arkansas retail market continues to show signs of healthy growth,” the report noted.

The regional industrial sector, filled by large distribution centers moving to the region, had been the highlight of the Central Arkansas commercial market for several years and remains stable though there was a slight uptick in vacancies to close the year. Vacancy rates of 3.2% were recorded to open 2023 and moved up to 3.5% in the fourth quarter. Lack of available space remains a top concern for the sector.

In Arkansas, Colliers has offices in Little Rock and Rogers that manage 20 million square feet of space. The company has more than $643 million in total sales in the state and leases more than $291 million in commercial real estate.

AMERICA’S SEED FUND IN ARKANSAS

America’s Seed Fund, which helps technology-oriented entrepreneurs bring their products to market, is bringing its road show to Little Rock on April 2.

More than 20 representatives from federal agencies will be on hand to help small business owners apply for funding in a competitive grant process in the seed fund, which is the common name for the Small Business Innovation Research and Small Business Technology Transfer programs. The programs encourage U.S. small businesses to engage in federal research and development with the potential for commercialization.

The Little Rock stop is part of a national tour of 16 states to tout the program and support technology startups. The event, hosted by the Arkansas Small Business and Technology Development Center, is free and open to the public.

“America relies on ingenuity to develop critical technologies and create the industries of the future, and we need all great ideas and inventions to propel our global leadership,” said Isabella Casillas Guzman, administrator of the U.S. Small Business Administration, one of the federal agencies leading the tour.

The visit is scheduled from 8 a.m.-2.:30 p.m. at the University of Arkansas Division of Agriculture office at 2301 S. University Ave.

The Little Rock stop will feature virtual panels, presentations and breakout sessions to help navigate funding opportunities available through America’s Seed Fund, which provides $4 billion in early-stage funding opportunities.

More information and registration is available at asbtdc. org/road-tour/.

TOOLBOX PROMOTES BLACK ENTREPRENEURSHIP

The University of Arkansas at Pine Bluff will host two events in February to emphasize the importance of Black entrepreneurship as part of Black History Month celebrations.

The Lunch-and-Learn series begins at noon Tuesday with a session on building a one-page outline to start your own business. The Feb. 20 event also begins at noon with a focus on accessing capital to start or expand a business.

“In the heart of Pine Bluff and across the state, we are committed to providing essential tools and insights needed to amplify the entrepreneurial spirit within the Black community,” said Adriene Brown, district director of Arkansas operations for the U.S. Small Business Administration.

“Toolbox Tuesdays” provides resources to help entrepreneurs and small business owners start, expand and increase their operations.

The University of Arkansas at Pine Bluff Business Support Incubator, Arkansas Woman’s Business Center and the SBA are the sponsors. Sessions will be held at the UAPB incubator, 615 S. Main St., in Pine Bluff.