Arkansas Commercial Real Estate Market Trends Analysis

Commercial properties that house a tenant that does business with other businesses (B2B companies) are considered industrial properties. Industrial tenants include manufacturers and distributors like supply houses.

But, at this time, there is an expanding group of industrial properties whose occupants are online purchase fulfillment centers that disburse products directly to the customer.

Industrial property investors will hold the property long-term and serve as the landlord. Their profitably calculations involve lease revenue and asset value growth. Leases can be either gross or net.

Annual and 10 Year Population Growth

Industrial property investors utilize population data for purposes that are dissimilar from residential investors. Sluggish or decreasing populations mean a shrinking tax base. If the local government can’t collect enough taxes, it isn’t able to maintain its obligations to properly repair the infrastructure that industrial tenants have to have.

A declining population is a good signal that commercial property values are presumably to decrease as well. Industrial renters are ongoing businesses that need employees. The desirable industrial renters will not move to a place that is dropping possible workers.

Property Tax Rates

As we saw with apartment building investments, tax rates are an accurate clue to the economic viability of a potential location. Stable tax rates are an indicator of a foreseeable market for your investments.

You may want to read more about commercial property taxation and commercial real estate tax reduction from our informative articles.

Accessibility

Industrial real estate renters usually move large quantities of goods or unwieldy items. Tractor-trailer trucks are routinely employed to accomplish this. Industrial real estate investors look for properties that are close to important roads that large tractor-trailer trucks can get to quickly.

There are industrial companies that use trains or airplanes to transport their goods. Industrial properties that are situated near an interstate make this easier, which makes the property more desirable.

Utilities

Manufacturers are likely to utilize large amounts of electricity and water. A property not having the ability to supply suitable utilities won’t draw those tenants.

Companies that are situated in retail spaces sell directly to the people in the market. This includes single-tenant and multi-tenant buildings. Single-tenant assets might contain a bank, a pharmacy, a restaurant, or an auto repair store.

A property that contains a couple or more tenants is classified as multi-tenant property, as are “neighborhood” shopping centers, “strip” malls, grocery anchored shopping, or malls with big nationally known tenants called “big box” shopping centers. “Lifestyle” retail shopping centers might incorporate retail, office, and residential spaces.

Retail landlords use “net” contracts that obligate the tenants to separately take responsibility for the taxes, property insurance, and maintenance of the common areas such as the parking areas. Retail renters additionally have to take care of the property.

A retail investor will utilize the same demographic data that their target renters employ to find a satisfactory investment asset.

Population Growth

Retail investors don’t exclusively look at the overall area’s populace and improvement. Their renters are considering the particular submarket, or trade area around the proposed location. Retail sites need to be visible and accessible to their shoppers as they go through their lives.

Population growth is important, but retailers demand a minimum amount of clients at this time. Retail tenants, and accordingly retail landlords will examine all populace information including size, increase, and daytime population.

Median Income

Income levels tell retailers where their clients are. Expensive goods require customers with large wages while lower priced products require lower income residents.

Median Age

Retail real estate buyers rely on age statistics that different investors ignore. Based on the category of center (grocery anchored, entertainment anchored, big box retailers) the age of the population can attract desirable retail lessees.

Property Tax Rates

Tax rate data is utilized by retail investors for the same reasons as residential and industrial property buyers. Growing taxes are charged to their tenants which lowers their occupancy rates, and the value of their asset could be lessened over time.

In an area demonstrating elevated real estate tax rates, it’s even more crucial to make sure your property isn’t overvalued by the county. If so, the best commercial real estate attorneys in Arkansas will tell you how to protest property taxes.

Office buildings lease working premises to businesses. Office buildings could be a one level flex space or a multiple level building. Major corporations frequently lease office space from others instead of using their business’ assets to buy or develop space.

Office tenants execute a “full service” contract which is also classified as a gross lease agreement. These types of deals add the landlord’s expenses, such as property tax and property insurance into the payment. The terms can be modified depending on the tenant and owner’s needs.

Office space investors hold these assets for a long time which creates returns from both ongoing lease revenue and the increasing value of the property.

Population

The populace demographic data that office space investors look for needs to indicate an adequate supply of workers for office renters. This consists of the populace’s size, age, and education level. It is vital for landlords to realize what their prospective tenants require and to analyze the region appropriately.

Property Tax Rates

A financially solvent municipality that furnishes a desirable living environment for office employees will have stable tax rates. A qualified workforce pool draws sought after office tenants.

Incomes/Cost of Living

Higher salaries can show an educated population that many office tenants need. It can additionally show the salary standards that employers will need to pay.

Education

The amount of education achieved by the potential location’s populace is specifically important to large office tenants. They should realize whether they are recruiting lessees who require higher levels of education or not.

When an investor obtains a property, rehabs it, rents it, refinances the property, and then repeats the process, it’s known as a BRRRR category of investment. This is a type of Buy and Hold method in which an income producing asset is held for a long period. The benefit is that the asset creates income while you keep it and could be liquidated later on for a profit once its worth has grown.

The investor picks up a residential property, repairs or improves it, and rents it out. When a profitable cash flow is achieved, the owner takes money out of the asset for refinancing their loan. The cash is utilized for the cash investment in an additional asset, and the procedure is repeated.

Traditional multifamily mortgages aren’t meant for purchase and rehab investments. This kind of projects mean a high risk for traditional mortgage companies.

However, lenders who could finance your deal can be found in the directory of commercial real estate service providers that lists the best Arkansas commercial hard money lenders as well as the top commercial rehab lending companies in Arkansas.

Also, don’t miss out on the real estate knowledge of the best commercial real estate brokers in Arkansas. Keep reading to understand what stats to discuss with them.

Median Gross Rents

This information informs investors whether they can realize their initial and future revenue targets. This single item is significant when the eventual market choice is made.

Property Value Growth

Property values need to be increasing in the community for a buy and hold investment to work.

Population

The key populace data for buy and hold investments is the growth rate. A growing populace is a good supply of renters and is more likely to support rising property values.

Income

To purchase the right investment property, investors must be acquainted with their target tenants’ amount of income. If you are comfortable owning mid-priced properties, you don’t need to find high wages.

Property Tax Rates

Higher tax rates will dampen both short and long term profitability. Stable tax rates are a sign of a vibrant, improving economy.

Keep in mind that counties’ assessments of property values are sometimes inaccurate, which makes you pay excessive tax amounts without knowing. The best Arkansas commercial real estate appraisers along with the top commercial property tax protest companies in Arkansas are used by smart investors to reduce your taxes.

Professionals in the real estate industry consider development as producing entire housing community ventures or any sort of commercial real estate. Developers purchase property that permits the development of building sites sold to homebuilders or commercial buildings that are rented.

This involves suitable zoning, land use design by civil engineers, construction plans for buildings, and the okay from the local municipality. Once all of the work is properly done, the developer manages the building and advertising of the completed product.

The time that’s needed to complete a real estate development could be several years. During that time, economic and regulatory shifts could impact the investor’s revenue. For this reason, development is known as the most speculative category of real estate investment.

A project can get interrupted by various factors causing a considerable delay before resuming development. While the construction workers aren’t on the site, the site can get damaged. Nonetheless, you can hire the best commercial property insurance companies in Arkansas to make sure that you obtain a sufficient compensation in such event.

Lenders want your project to get protected by a reliable insurance. Ask the best commercial construction real estate lending companies in Arkansas whom of the local insurers they approve of.

Population

Real estate developers use the same demographic data that their possible purchasers and tenants look at to find places with suitable standards of population size and growth, economic viability, and educational achievement.

Income

Retail real estate developers consider wage rates to place their project where it could attract the buyers that their targeted renters require. Lower incomes could still indicate a good location for middle income retail centers.

Information on wages can help industrial and office tenants see what they’ll have to pay their employees in that place. Those developers analyze income data as one indication of a site’s possibilities for profitability.

Education

Industrial and office property renters need distinct levels of education in the area’s citizens. White collar firms need to find more college graduates. Industrial workers do not require more than high school grads.

Age

Most developers need to discover a young to mid-life citizenry that furnishes a steady tax base. Industrial and office developers want an employable age populace. Residents who are actively employed typically go shopping and dine out repeatedly at retail businesses.

Residential property developers seek the same age category because they are more likely to be upwardly mobile, which helps home sales.

Real estate loan note investors purchase existing loans cheaper than the sum owed and turn into the new lender. The original lender may be willing to sell because they want capital, or because the borrower is not current with their loan payments.

One mortgage note investment plan is to set up a new loan payment calendar that is easier for the borrower to maintain, and preserve the investment in their portfolio long-term. They realize that if the borrower discontinues making payments, they can take back the asset and sell it, which is a portion of the strategy.

Population

Promissory note buyers, similarly to other investors, need to see the number of residents in the prospective area and if that number is increasing or shrinking. Investors know immediately if a market is a possibility by researching population information.

Property Values

Rising real estate values are the most important indicator when promissory note investors estimate an area. The investor is lending on the value of the collateral instead of the borrower’s payment ability.

Property Tax Rates

In an area with rising tax rates, the greater cost of having a house may push borrowers into default. This would be unacceptable for interest revenue, but is in fact accepted by investors who hope to turn a profit sooner by repossessing the collateral.

An easy way of investing in the purchase and operation of real property is to purchase shares in a REIT (Real Estate Investment Trust). Their revenue is derived from rents and the periodic unloading of properties.

REITs are obligated to distribute 90% of their profits in dividends which appeals to many investors. Low net worth investors appreciate REITs because they can liquidate their shares anytime.

Such investors are passive investors who have nothing to do with the choice or oversight of the assets.

Investors, who plan to quit active investing but need to stay in real estate, look into buying REITs. They acquire REIT shares after selling real property.

There exists a powerful legal procedure allowing you to defer taxes on real estate sale in this situation. Our resources — Can You Do a 1031 Exchange to REIT Shares? and A-to-Z Guide to Delaware Statutory Trust (DST) 1031 Exchange — will allow you to understand the benefits and rules of this exchange.

For this type of procedure, you will need to get help from a 1031 exchange accommodator. Our directory offers the best 1031 exchange Qualified Intermediaries in Arkansas to narrow down your search.

An additional investment option that raises capital from people to invest in real estate is a real estate investment fund. These ventures maintain interest in organizations that invest in real property, including REITs.

This investment option doesn’t distribute dividend revenue to their members. The investment income to the shareholder is the expected growth in share worth.

The most popular investment funds include mutual funds, ETFs (exchange-traded funds), and private equity funds for wealthy individuals. Like REITS, real estate investment funds provide investors liquidity by allowing them to dispose of their shares on the market anytime.

Since they are passive investors, fund shareholders aren’t involved in any choices such as asset acquisitions.