Office, industrial vacancies fall in 1Q

Office space is filling up in the Springfield area, while the retail and warehouse sectors lost some ground in the first quarter, according to commercial real estate tracker Xceligent.

The first-quarter Market Trends report by Xceligent found all three sectors trended down in terms of total vacancies, compared to the same quarter in 2013, but 87,000 square feet of retail space and 30,000 square feet of industrial space opened up during the quarter.

The single largest change in occupancy during the first three months of the year occurred when Bass Pro Shops occupied a 49,000-square-foot warehouse at 2726 E. Jean St.

There were several other notable moves in the report, which analyzes activity in Springfield, Strafford, Rogersville, Ozark, Nixa, Republic and Willard.

In the office sector, Springfield-based engineering firm Malone Finkle Eckhardt & Collins Inc. moved March 28 to its new 6,800-square-foot headquarters, 3333 E. Battlefield Road, Ste. 1000. MFEC Vice President and Managing Partner Jennifer Luce said the firm’s lease was up at 2040 E. Sunshine St., and company officials felt it was time for an upgrade after nearly three decades in the building.

“We wanted a fresh start in a new space, and it’s obviously hard to remodel in a space when you are working in it. That contributed to the decision,” Luce said.

The firm shares the building with Simmons First National Bank and a parking lot with Jimmy’s Egg. Luce said MFEC signed a five-year lease with Gardner Properties of Springfield LLC in January.

“The owner financed part of it, but we handled the drawings, the construction contract, the management of the construction itself. We basically renovated it to suit our needs,” Luce said, adding Kenmar Construction Inc. executed the construction renovations.

The office vacancy rate continued its steady downward trend in the quarter, landing at 9.4 percent – dropping more than a full percentage point in the past year, according to Xceligent.

Nixa posted the highest office vacancy rate in the area at 21.9 percent, while Rogersville and Strafford reported no vacancies. Across the market, there is 594,000 square feet of vacant office space in an inventory of 6.3 million square feet, according to the report.

On the retail side, Rogersville had the highest vacancy rate at 16.8 percent, while Willard claimed no vacancies.

R.B. Murray Co. Vice President Ross Murray said despite the fact the retail market saw vacancies jump to 5.1 percent from 4.6 percent in the fourth quarter, he’s not concerned.

“Retailers, generally, aren’t looking to move in the fourth quarter because that’s their busiest time of year,” Murray said.

“Around January or February is when they start putting plans in place, and activity starts picking up pace in mid-February and will roll through around October.”

In the last year, the retail sector vacancy rate has inched down to 5.1 percent from 5.3 percent.

Murray has handled queries from a handful of regional and national restaurants considering the Springfield market.

“I’m working with four chains right now,” Murray said, declining to disclose the names. “And that’s encouraging.”

In the office market, Murray has taken note people are building again.

Murray pointed to the 50,000-square-foot KPM CPAs building going up near Fremont Avenue and Republic Road as an example of new construction, but it’s not the only one. He said two other companies are building at Terra Green Office Park on South Blackman Road near Springfield Catholic High School. Elliott, Robinson & Co. LLP is constructing a 17,000-square-foot office building, and Terra Green Dental is beginning work on an 11,000-square-foot facility.

“It’s just good to see buildings of that size and caliber being constructed,” Murray said.

Jerry Redfearn, a commercial agent with CJR Commercial Group and member of Xceligent’s local industrial board, said industrial space in the Springfield area is almost too low at 5.2 percent, and the market will need new construction soon. The industrial vacancy rate was 5.9 percent a year ago, according to Xceligent.

“Among the board, we think there is need for more industrial space to be built. There is some demand for it,” Redfearn said. “The only drawback is you can’t ask for a high enough rent to make it possible. A build-to-suit would work great, but just to build a (speculative) building and hope to find tenants … there’s not enough return on your money.”

Murray said there’s a need for midtier industrial properties in the area.

“If you look at the number of industrial properties between 50,000 and 75,000 square feet, you can count them on your right hand. There’s not many outside of Solo,” Murray said. “We’re working with several companies that are looking at Springfield for new facilities.”

According to the report, there are seven available industrial properties in the area with 50,000 to 100,000 square feet of space. Ozark recorded the highest industrial vacancy rate in the first quarter at 13.8 percent, while southeast Springfield had the lowest rate at 1.9 percent, among the areas that had an inventory of industrial properties.  

Because of a lack of available facilities, Murray said he expects there will be some new construction in the industrial sector in the next six to nine months.

“I think you’ll start to see some dirt moving around on the industrial side,” he said.