Commercial vacancies improve in 4Q

Space is filling up across the Springfield area, and the Kelly brothers are among the new tenants in Nixa.

Alex Kelly finished his college baseball career last spring at Saint Louis University and brother Ray Kelly is an assistant baseball coach at Missouri State University. The brothers from Colorado own a Choice Baseball franchise at 2160 N. Fox Hollow Drive in the Fox Hollow Industrial Park.

In October, they opened their baseball training and practice facility – the first franchise for the Fort Collins, Colo.-based company – in a 35,000-square-foot building owned by Rick Barnhouse.

The move was the area’s largest in the industrial sector during the fourth quarter, according to commercial real estate tracker Xceligent.

It also represents an improving climate for commercial property owners.

Fourth-quarter vacancies fell markedly across the office, industrial and retail sectors, according to the most recent Xceligent Market Trends Report, which tracks commercial real estate activity in Springfield, Nixa, Ozark, Republic, Rogersville, Strafford and Willard.

The most dramatic drop came in the industrial sector, which ended the year at a 5.1 percent vacancy rate, an improvement from 6.7 percent in fourth-quarter 2012. Still, industrial vacancies slipped slightly from the 4.8 percent rate recorded in the third quarter last year.

The retail sector marked a fourth-quarter vacancy rate of 4.6 percent, down from 5.3 percent in fourth-quarter 2012, and office space was filling up, too, though the sector has the most room for improvement. Just under 10 percent of offices were vacant last quarter, compared to 10.4 percent in the final quarter of 2012.

Power center influence
Commercial appraiser and property owner Eric Roberts of Roberts & Associates had hoped to be the Kelly brothers’ landlord. But it wasn’t in the cards.

Roberts had been shopping some 20,000 square feet to lease around the corner, at 2172 Fox Hollow Drive, but tenant Prestige Millworks decided to wait a year before moving to a new facility in Ozark.

Alex Kelly acknowledged the new property wasn’t their first choice, but he said the brothers now have room to grow. They currently lease a little more than half of the building, or 20,000 square feet, for $5,500 per month.

“Some things changed last minute, and this one came onto our radar. The building is way different now. There were walls everywhere when we first walked through here,” Kelly said, noting Oak Grove Construction handled the physical changes.

Roberts said the overall commercial market is slowly improving, but there is still plenty of space available. Retail space, he said, isn’t as full as the 4.6 percent vacancy rate might suggest.

“If you take the Battlefield Mall out and the other big-box retail stores, like Wal-Mart, the picture is not as rosy as it seems,” Roberts said.

Though expansive retail properties, aka power centers, comprise only 25 out of 591 area retail centers, they represent 3.5 million square feet of occupied space and only 0.2 percent vacant. Excluding the big-box properties, the area retail vacancy rate is 6.3 percent of the remaining 13.3 million square feet, he said.

Roberts said low interest rates during the past three years have allowed the market to largely recover from the recession and a sizeable departure of industrial space left by Solo Cup, when the plant closure in 2011 unloaded roughly 1 million square feet on the commercial real estate market. Roberts said speculative building could come back in 2014, if interest rates don’t climb significantly.

Plans on hold
John Haik, president of commercial property manager Haik Investment Inc., is planning to build a retail center on land he owns behind Brown Derby at Fremont Avenue and Republic Road.

He had anticipated building a 10,000-square-foot furniture store for his daughter, but after a holiday engagement, she is moving out of town.

“I’ve got to go back to the drawing board,” Haik said.

“It’s probably not going to break ground for another six to eight months.”

In addition to the furniture store, he had planned a 2,000-square-foot warehouse for his wife’s business, James Decor, and another 7,000 square feet for lease.  

“I figured the rest would have been easy to lease. They would have been small units – 20 feet by 70 feet – and I’ve had inquiries about it before I have even started,” Haik said.

“I know there is still a demand. I just have to revise everything.”

Of the two retail centers Haik owns on East Republic Road – Gallery Eleven, which houses his outdoor retail store, Ozark Adventures, and River Plaza, east of National Avenue – he said last month there was only one 1,400-square-foot vacancy out of 35,000 square feet combined.

“I consider myself lucky,” he said.

In 2013, more than 511,000 square feet of inventory was absorbed in the industrial sector, according to Xceligent, with northeast Springfield and Nixa filling the most space.

General retail properties experienced the most positive absorption last year with nearly 96,000 square feet of growth. In the office sector, southeast Springfield far outpaced other markets with nearly 52,000 square feet absorbed in 2013.