Economic Growth And Elections
Heads up! The next quarterly CCIM Commercial Real Estate Lunch take place July 19. This quarter’s discussion topic is commercial real estate in North Little Rock. Danny Bradley from the North Little Rock Mayor’s office will be the featured speaker. More details and registration are available here.
Restaurants around Little Rock have been closing. Del Frisco’s Grille is yet the latest example in a recent series. Some new restaurants have opened. Juicy Seafood on Cantrell Road (aka Highway 10) is a recent addition. I’m relying on only my own observations to suggest that the empirical data yields net negative absorption. I believe the same holds true with retail. Because of the investments in restaurant buildings for the specialty of use, restaurants tend to beget restaurants. Retail buildings however are generally four walls, a roof and a floor that are essentially blank canvasses for adaptive reuse at discounted costs. The pre-Great Recession retail expansion of the ‘70s, ‘80s and ‘90s positioned the United States to have the most retail floor area per capita of any nation in the world. The so-called “Retail Armageddon” is in some part an adjustment of over-supply. Over supply, limited demand and changing demographics are leading to redevelopment of some retail properties to office, mixed-use, medical and efforts to create live-work-play environments. Most of the available properties of this type can be purchased at a fraction of replacement cost, or the cost to build them today. This low cost relative to new, or newer, construction affects the demand for new construction. Contractors and vendors specializing in renovation may benefit. It seems like those contractors and vendors that are invested in creating new product are plenty busy anyway so maybe this helps create balance in the market.
Some recent Little Rock commercial real estate happenings include an update on a previously mentioned transaction involving Centennial Bank. Related properties at 1215 and 1221 Rebsamen Park Road recently sold. Those addresses denote the former Dixie Café and the parking lot serving the same. The two properties combine for a total of 45,049 square feet of land area according to the Pulaski County Assessor’s office. Similarly, the former restaurant building has a floor area of just about seven thousand square feet. What was the price you ask? County records tell us that the consideration was $1,300,000. Now, given the expense in adaptive reuse of a restaurant building, and without knowing the construction budget, I see this effectively as a land sale. The cost of converting a restaurant building to a bank building, if that’s the plan, must be similar in cost to constructing a new building from the ground up. Heck, even demolition costs are expensive these days. As a land sale, that’s north of $1,250,000 per acre. This per acre value pales in comparison to the 0.67-acre sale at 610 S. Bowman. Back in January of 2016, this carve-out parcel was sold by Walmart for $1,320,000. Subsequently, a Freddy’s Frozen Custard & Steakburgers was constructed on the site, including site development costs to create a building pad. The resulting 2,627 square foot single-tenant-net-leased building sold last month for the bargain price of $2,420,000. With a long-term lease in place, that’s $1,100,000 more that what was paid for the land. That works out to be a difference of just about $418 per square foot relative to the building area. Not all restaurant sites on the west side are created equal. A building constructed for Dunkin Donuts at 10721 Kanis Road sold last month for $1,275,000. The land for this building was purchased some time ago, in December 2011. Back then, the property traded for $259,000. Hard to say what the land value is on that corner without the building. It will be interesting to see what the next use of that building is. Just around the corner at 1301 S. Shackleford, the Hampton Inn sold for $11,925,000, or almost $95,000 per door.
In the possibly-coming-soon department, there is a proposal in front of the Little Rock Planning Commission to raze the building at 7706 Cantrell Road where Hog Wash Detail has been located and replace it with a tunnel-style car wash. That seems like a tight fit to me. Maybe the property is deeper from the street than it appears to be. A bakery is being proposed for the property at the northeast corner of Van Buren and A Street. This is one block north of Markham. Based on the Planning Staff’s review of the proposed development plan, this project may not be rising without some substantial changes to the recipe. Little Rock’s westward expansion will continue under a proposal for a 180-acre annexation along Kanis Road to bring more Deltic/Potlatch property inside the City Limits.
Work was done recently to homogenize width, curbs, gutters and sidewalks along Taylor Loop Road between Rahling Road and La Marche Drive. Widening and other improvements had been done piecemeal by property owners over the years in accordance with the Boundary Street Ordinance. The resulting roadway was wider in some sections than others, and in some areas there were curbs, gutters and sidewalks while in other areas there were just open ditches. The area has seen steady residential development for several years. Since the construction of Don R. Roberts Elementary School and the extension of La Marche Drive there has been a further uptick in investment in neighborhoods around Taylor Loop Road. It is worth noting that both the La Marche Drive extension and this evening-out of Taylor Loop Road were completed by the City of Little Rock. This effort by the City looks to have a compounding effect as there are even more residential developments proposed in the area since the work was completed earlier this year. A couple of those proposed are La Marche Village at the corner of Taylor Loop and La Marche, and Townhouse Apartments at the corner of Taylor Loop and Gooch Drive. Put down your pitchforks, the site plan reflects buildings that are effectively six attached patio homes, not a three-story multi-hundred unit complex. Were it me, I might rename this project.
In other school news, word on the street is that Little Scholars Academy (LISA) charter school in North Little Rock is pursuing an expansion of its Landers Road location. I’m told that LISA is purchasing land adjacent to the current building, which started life as a Best Buy store (see above regarding re-use of retail buildings), for a new high school building and some athletic fields. It seems that more kids, and parents, want to further their educations at LISA.
Warning, more editorializing ahead! Jobs, jobs, jobs; jobs are the foundation for economic growth in a community. Without jobs, demand for goods, services, homes and business locations lag. The mayoral election this fall is, at the end of the day, about jobs. Decision makers in this day and age choose business locations in large part on quality-of-life issues. Why? Because they can. Dozens of communities have a good handle on the basics such as public schools, public safety and public works. Those communities are in a position to tout their good records in those departments, to brag about their quality of life, to show that they have dynamic downtowns AND that they had the foresight to invest in their neighborhoods beyond downtown. It is not reasonable to vainly compete in a 21st century world with mid-20th century rules, regulations and organizational structure. Little Rock has an income divide. Little Rock has large percentages of those with plenty and those with little. Those who are in in the middle are choosing to live where they perceive public schools, public safety and public works to be better handled than Little Rock.
This fall is an election for the next Mayor of Little Rock. Mayor Stodola has chosen to retire. So, there will be a change of mayor. Do you have questions, comments or concerns for the next mayor? Get a pencil or open the calendar on your computer or smart phone. Mark this date. On Sept. 18 (that’s closer than you think it is … ) there will be a Commercial Real Estate Industry Issues Lunch. The candidates for the 2nd District Congressional seat and the candidates for Little Rock Mayor will be present to answer questions and provide insight into how their plans might affect commercial real estate in Central Arkansas. You can find more information and purchase tickets, or an entire table here. I hope to see you at Pleasant Valley Country Club.
Tips and suggestions, well most of them anyway, are appreciated. Hope you found something interesting in the column this month. Check back again next month for the things that didn’t get included here this time and that pop up between now and then.