The 10.1-million-square-foot Little Rock office market is going sideways, with an improvement in the first quarter partially reversed during the second. The second quarter ended with a vacancy rate of 14.0%, up 10 basis points from the prior quarter and down 20 from a year earlier. The respective rates for Class A and B/C space were 11.3%, down 10 basis points for the quarter, and 15.7%, up 10. First Glance data put the rate unchanged at 14.0% in the third quarter. No new space has completed construction within Reis submarkets since 2009, so the uneven vacancy trend reflects uneven net absorption. Net absorption was slightly positive through the first three quarters of 2012 after having been negative the four prior years, but only due to a strong first quarter.
A 21,000-square-foot building for Verizon is under construction in suburban Little Rock, but otherwise development is quiet. The redevelopment of the 100,000-square-foot Blass Building in downtown Little Rock may break ground soon, however, as it is expected to complete construction some time in 2013. Reis predicts demand will finally shift to positive ground permanently, with the vacancy rate falling to 13.8% at year-end 2012 and 11.4% at year-end 2016.
Both the average asking rent and the average effective rent edged down 0.1% in the second quarter, to $15.66 psf and $13.12 psf, respectively, reversing first quarter gains. The asking average edged back up 0.1% in the third quarter according to First Glance data, while the effective average had been down 0.1% through August. Rents, accordingly, were changing little, but Reis predicts increases of close to 1.0% for all of 2012. Improving gains are forecast to follow, eventually exceeding 4.0% by both measures in 2016. The respective Class A and B/C asking averages for the second quarter, meanwhile, were $17.56 psf and $14.42 psf, each down 0.1%.