The Supply Side: Supplier office space tightens, teams expand

story by Kim Souza

Editor’s note: The Supply Side section of The City Wire focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by The City Wire and sponsored by Propak Logistics.

As more Wal-Mart suppliers and third-party service firms are hanging shingles in Northwest Arkansas, real estate experts and retail insiders around Bentonville say the commercial office space market is tightening.

Insiders estimate more than 1,300 suppliers have set up offices within a 27-mile of Wal-Mart’s home office in Bentonville in the past decade. This employment sector provides nearly 6,000 local jobs and continues to expand each year.

Butch Gurganus, commercial broker with Colliers International, makes his living leasing space to the retail supplier community at large. He said it’s been a busy year with a “fair number of suppliers” moving to larger spaces as they add staff.

“I know it looks like there is a lot of office space around town but its tightening up, particularly larger spaces in proximity to Wal-Mart’s layout centers,” he said.

Colliers relocated ConAgra, Hanes and Scotts to larger offices in the Beau Terre Office Park this year. ConAgra acquired St. Louis-based private-label food maker Ralcorp for $6.8 billion in November 2012, the firms combined their sales offices in Bentonville leasing 28,000 feet at Beau Terre earlier this year. The combined firms employ roughly 100 professionals in Bentonville at this time.
Gurganus said 20,000 square feet is becoming a common sizes suppliers request, and that compares to 2,000 square feet often requested by new supplier teams, or those who hope to be suppliers in the near future.

“We still see one and two-person teams locating here, but the teams already on the ground are also expanding,” he added.

Corporate recruiting expert Cameron Smith said there has been an influx of digital companies from Silicon Valley and Austin, Texas, eyeing Northwest Arkansas region. At the same time the Fortune 500 companies supplying Wal-Mart are adding social media, digital marketer positions to their teams.

Smith is the CEO and founder of Cameron Smith Associates in Rogers and assists hundreds of Wal-Mart retail suppliers with talent recruitment. On any given week, Smith said there are up to 125 open jobs in the local supplier community and about 30% of those are for category managers. He said replenishment savvy expertise is in big demand among the largest suppliers. Combine that with a push for more social media marketers and digital statisticians and the need for more office space becomes necessary.

Atlas Technology Group is a service provider to the local retail supplier community and recently found itself in need of more space in Bentonville as it expanded its staff from six employees to 22 in the past few months. Pete Louree, marketing director at Atlas, said last month the software intelligence firm recently moved from a 3,000-square-foot space to a 6,500-square-foot office on 28th Street in Bentonville.

“We are already out of space and are adding 1,500 square feet at this time,” Louree said.

The company expects to end 2013 with an employee headcount at 32 as the hiring of 10 additional technology engineers is complete.

Smith said this type of supplier growth is happening across the area and he expects it to continue throughout the next few years as real-time data collection for consumer marketing becomes more mainstream.

A common issue Smith said he hears from digital media companies out of Silicon Valley is the lack of top grade Class A space.

John George, spokesman for Hunt Ventures said their next large Class A project is expected to come online in late 2015 as they finish a nine-story 222,000-square-feet office building near Hunt Towers at Pinnacle Hills in Rogers. George said pre-lease talks indicate there is good demand for 30,000 to 40,000 square-feet offices spaces and a good deal of interest is coming from the supplier community.

Smith said he also is aware of another local group in the early stages of planning a multi-story, high profile office building to serve Class A tenants. He expects more details on this venture to emerge after the first of the year.


Gurganus said as new space comes online it may be harder for existing tenants to move up given the longer lease requirements now in play.

“We still see folks coming in here and asking for a one-year lease, but the minimum standard is 3, 5 or more years these days and that’s for Class B space,” he said.

The lease rates for typical class B space average between $14 and $16 per foot in and around Bentonville, according to Colliers. Class A space costs about $23 a foot and is rising.

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