Central Arkansas' commercial real estate market continued to adjust to the new covid-19 environment as 2020 closed out.
Landlords in the region became more flexible in accepting short-term leases and tenants -- especially bigger office groups -- seeking the ability to downsize as they renewed leases.
The results of a fourth-quarter market report issued last week by Colliers International's Arkansas office were that "some companies are seeing results with working from home while others are still looking at gradual re-entry into 2021."
The survey noted that office and industrial vacancies remained relatively flat compared with the second quarter, when the coronavirus first hit, as real estate vacancies increased by nearly 5 points, rising to 16.9% at the end of 2020 compared with a vacancy rate of 12.3% at the end of June.
That's not surprising considering the economic havoc caused by the lingering pandemic, which has crippled the retail industry nationwide. In Arkansas, the state dropped more than 8,000 retail jobs from December 2019 to December 2020.
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On the upside, Collier's report noted that vacancy rates for all three sectors improved over the end of the third quarter. Office vacancies dropped to 18.1% from 20.3%; industrial fell to 10.2% from 12.5%; and – though up from the second quarter – retail vacancies improved slightly from the 17.5% recorded at the end of September.
"Big-brand and essential retailers are still making new deals and have low vacancy rates," the report said. "These retailers are the reason we see a lower vacancy rate, 16.9%, this quarter."
Yet the Midtown and west Little Rock retail markets remain challenged. Vacancy rates there climbed a combined average of 5%, and lease rates also are dropping.
Non-essential retail likely won't improve significantly until covid vaccination efforts increase, according to the report, which also predicted a rebound for multifamily real estate as vaccines are more widely distributed and infection rates start to drop.
"The 2021 multifamily sector is looking forward to a return to normalcy as vaccinations increase," Collier's said in the study.
In other highlights, the report says short-term leases in the office market will remain a trend in 2021 as companies evaluate how much space they need to provide employees as work-from-home trends continue. Investors likely will shy away from multi-tenant office space in the shifting environment.
However, the report said investor confidence and the demand for industrial space remains high and should continue into the year. "We continue to see demand for both midrange blocks of space as well as bulk distribution, which is a testament to both continued consumer reliance on e-commerce during the pandemic and user demand to increase safety stock," the report added.
In retail, lease rates may begin to increase this year for tenants that provide essential services such as auto repair, grocery, banking, and medical and pharmaceutical care.
Colliers International, with offices in Little Rock and Rogers, is the state's largest commercial real estate, property management and development management firm. It has total sales of $398 million and 115 employees in Arkansas. The Canada-based company has about 18,000 employees in 68 countries.
NEW LENDER
Capital CDC, a nonprofit provider of small-business financing, has been approved to operate as a certified development corporation in Arkansas.
The Austin, Texas, organization will establish operations in Clarksville as its base in Arkansas. The company has provided financing in Texas and New Mexico.
The U.S. Small Business Administration approved Capital CDC's Arkansas application.
"Increased access to capital for small businesses is a top priority for SBA, and our mission here in Arkansas, particularly during the ongoing challenges caused by the pandemic," said Edward Haddock, the federal agency's district director for Arkansas.
Capital CDC has worked with more than 1,000 small businesses and partnered with financial institutions to provide Small Business Administration financing for the acquisition or construction of buildings, machinery or equipment using the Small Business Administration 504 loan program.
"We bring to Arkansas, years of practical experience and a unique blend of expertise in the utilization of SBA products, to offer small businesses an efficient process for securing long-term, fixed low-interest SBA financing," said Thomas Braasch, executive director for Capital CDC.
PPP LOANS
Bank directors and shareholders are allowed to apply for Paycheck Protection Program loans from their banks under modified rules issued last week by the Federal Reserve Board.
"To prevent favoritism, the board limits the types and quantity of loans that bank directors, shareholders, officers and businesses owned by these persons can receive from their affiliated banks," the Fed said in announcing the new rules. "However, these limits have prevented some small-business owners from accessing PPP loans – especially in rural areas."
The guidelines are an extension of similar rules that were issued last year during the initial round of Paycheck Protection Program funding. The rule extension is effective immediately and applies to Paycheck Protection Program loans made through March 31.
DISASTER SUPPORT
Small businesses have until Feb. 22 to apply for disaster relief loans for economic losses suffered by severe storms that ripped across Northeast Arkansas last March.
Loans are from the U.S. Small Business Administration and are available for non-farm businesses, agricultural cooperatives and other small businesses engaged in aquaculture.
The Small Business Administration is making loans of up to $2 million over 30 years to cover fixed debts, payroll, accounts payable and other expenses that cannot be paid because of the disaster. Interest rates are 3.75% for businesses and 2.75% for private nonprofit organizations.
The low-interest federal disaster loans are available in Craighead, Greene, Jackson, Lawrence, Mississippi and Poinsett counties.
More information and applications are available at disasterloanassistance.sba.gov.
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