Archive for Tuesday, December 17, 2002

Commercial real estate market struggling

December 17, 2002


Lawrence's struggling office market didn't regain its health in 2002 and likely won't for several years, according to a new study by an area commercial real estate firm.

Real estate agents with Lawrence's Grubb & Ellis/The Winbury Group told about 80 people Monday that Lawrence continued to have high office vacancy rates in 2002.

Kelvin Heck, a broker with the firm, said numbers the company recently gathered showed 17.8 percent - or roughly 410,000 square feet - of office space was vacant in Lawrence. Those numbers are nearly identical to 2001 vacancy numbers but up significantly from the 5 percent rate in 1997. The national average is 17 percent.

Heck said it might be years before economic conditions improved enough for the Lawrence and national markets to return to a healthy vacancy rate around 10 percent.

"I think what people are beginning to realize is that it may take the better part of the decade for the market to return to an equilibrium," Heck said. "That's a pretty strong statement, but I think that's the situation we're in.

"Many businesses are just making do with less space these days. With money being tight, they're squeezing as much as they can out of their existing space."

Heck anticipates the office vacancy rate may fall to 15 percent in 2003 but said it wouldn't drop further unless there was a "fundamental change" in the national economy. He said national projections indicated it might take until 2007 for the vacancy rate to return to 10 percent.

Downtown has the highest percentage of vacancies, with a rate of 37 percent. Heck said the high number could be attributed to the loss of the Sprint PCS customers service center in the former riverfront mall.

The company also delivered a report on Lawrence's retail and industrial real estate markets. The retail market has a vacancy rate of 6 percent, or 270,000 square feet, compared with 3 percent and 141,000 square feet in 2001. Real estate agent Allison Vance Moore said the closing of the Payless Cashways store on south Iowa Street significantly increased the vacancy rate.

The national vacancy rate for retail space is about 7 percent.

"I think we're still healthy, but I'd like to see us put a lid on it at 6 percent," Moore said. "We're faring better than Kansas City, though. They're at about 10 percent."

The vacancy rate for industrial property is 5.5 percent, or 425,000 square feet, up from 2 percent, or 150,000 square feet, in 2001.

Broker Marilyn Bittenbender said that number was up in large part because of the loss of Davol Inc., which still is operating but was included in the vacancy rate because the company has announced it will close its east Lawrence plant this year. Without the closing, the rate would be near 2 percent.

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