Why WeWork Is Breaking Its Own Mold To Build In Arkansas

Bentonville, Arkansas, has been a company town for Walmart for decades — so why is The We Company doing something there it has never done before?

In April, the coworking giant announced that it will develop a 200K SF, ground-up WeWork in the heart of Downtown Bentonville, also known as Bentonville Square, as part of a partnership with local developer Josh Kyles and his company, City Center LLC.

Though groundbreaking is not expected to happen until next year, the building looks set to be the second ground-up project that WeWork has a hand in developing. Unlike with the first, Dock 72 in the Brooklyn Navy Yard, WeWork will be taking the entirety of the office portion. It will also be involved in picking tenants for the ground-floor retail space, newly hired Vice President of Architecture James Slade said in an email.

The building will also be an outlier in WeWork's portfolio in another way: At a population of roughly 50,000, Bentonville is easily the smallest municipality to contain either a completed or announced WeWork. The company declined to confirm if it was the smallest metropolitan area in its plans.

The seat of Benton County in the northwest corner of Arkansas, Bentonville has a smaller residential population than neighboring Rogers or nearby Springdale, the latter of which is home to Tyson Foods, the biggest exporter of beef in the U.S. Trucking giant JB Hunt is headquartered in nearby Lowell.

Including Fayetteville in neighboring Washington County, it all comprises the 525,000-person Northwest Arkansas Metropolitan Statistical Area, named one of the 25 fastest-growing metros in the U.S. as of 2016, according to the U.S. Census Bureau. The growth story is one WeWork is eager to tell as an explanation for its decision.

"As we explored the market, it quickly became obvious Northwest Arkansas was a market primed for continuous growth with untapped demand," Slade said. "With growth set to double by 2035, Northwest Arkansas is primed to be a regional powerhouse, and its highly educated workforce is at the heart of this potential."

The We Company began sniffing around the site, a one-and-a-half acre plot at 224 North Main St., a year and a half ago as one of three potential Northwest Arkansas sites, Slade said, its search aided by Rogers-based Cushman & Wakefield|Sage Partners.

Though WeWork needed more than one major headquarters to justify its Bentonville location, Walmart still is the main draw for the company, if only indirectly.

"As a company, [Walmart] encourages vendors to locate in Bentonville as a way to establish a direct personal relationship," Slade said. "One result of this strategy is that there is a need for office space for all of these partner companies within Bentonville. These partners vary in size and business type. Our building will be designed to address this need directly."

Slade declined to comment on if WeWork and Walmart will have any direct involvement with each other in Bentonville.

As one might expect from a 50,000-person town, new commercial construction of any significant size is rare in Bentonville, according to Blue Crane LLC Director of Real Estate Jonathan Navallo. Before WeWork had anything to do with the town, an ecosystem of local and regional coworking operators in redeveloped buildings were already responding to that demand.

“There’s a decent amount of coworking space in town, and all of the offices in those spaces are completely full," Navallo said. "So there’s clearly demand that’s not being met.” 

Tech companies and entrepreneurship traditionally go hand in hand with coworking, and  Arkansas has required its high schools to offer coding and computer science classes since 2015 to foster that spirit. Although the state's education spending and outcomes rank near the bottom of the nation, that educational focus dovetails with The We Company's vision for society, as evidenced by its WeGrow division, which includes an elementary school in New York and Flatiron Academy coding classes in multiple markets.

“That underpins the education of students entering the workforce, so they have a base in technology," Navallo said. "So a lot of tech companies have sprung up in Northwest Arkansas, and a lot of that depends on [the business of] Walmart, JB Hunt and Tyson.”

In general, WeWork's lofty rhetoric of culture creation and community involvement will find a welcome partner in an area that is increasingly identifying with the culture of cycling.

Though the site is in the heart of town, it lies a mile away from the Walmart Home Office, as the retail titan calls its headquarters. Over the next five to seven years, the company plans a complete reimagining of its own sprawling campus to be more modern, more technologically advanced and greener.

Of the 350-acre campus, 15 or so acres will be reserved for lakes, and bike paths will be a central means of transportation, as it already is for much of Northwest Arkansas. The Waltons, Walmart's founding family, donated millions of dollars to create the Razorback Greenway, a dedicated bike trail that connects Bentonville, Fayetteville, Rogers and Springdale.

To hear Navallo tell it, the bike culture and naturalism that the Waltons have infused into the area is nearly as influential as Walmart in driving the recent population growth.

“Anecdotally, a lot of people have moved to the area primarily for the bike trail, and everywhere in Bentonville, you’re only a five-minute bike ride to the trail," Navallo said. "Other bike hubs like in Colorado are a bit of a drive from the big bike trails.”

Navallo told Bisnow he bikes from his home in Rogers to his office in Bentonville in about 30 minutes, and might encounter as few as two red lights because the Razorback Greenway is separate from roadways.

The Greenway has become such a part of Northwest Arkansas life that newer office buildings, like Tyson's recently redeveloped space, have specific amenities geared to bike commuters such as showers and wall hangers in the office to integrate bike storage with the decor, rather than hiding them in a large closet or on the street, Navallo said.

Some homes are located adjacent to the tree-lined trail, a perk that Navallo estimates can add $8K in value. Through a combination of Walmart's influence, the Greenway and other fundamentals, multifamily development has spiked in recent years. Bentonville's city website claims that $304M worth of residential permits were issued in 2018, a 62% increase over 2017.

Though a 200K SF WeWork is an outsized development compared to Northwest Arkansas' current office stock, it may not be for long. Sage Partners is in the early phases of a $100M mixed-use development surrounding its Rogers headquarters.

Northwest Arkansas added 136K SF of office supply in the second half of 2018, according to a report from the University of Arkansas' Center For Business and Research (in the Sam M. Walton College of Business). Its office vacancy rate dropped to 8.4%, the lowest it has been since 2004.

"[City Center LLC] understands that this WeWork is a model for future development, and that the community will shape and be shaped by what we do here," Slade said.