Vacancy signs outside Lawrence office buildings finally are starting to come down, according to a new analysis of the Lawrence real estate market.

The city’s vacancy rate for professional offices fell to 11.8 percent in 2004, according to the report from Grubb & Ellis/The Winbury Group, a commercial real estate firm with offices in Lawrence and Kansas City, Mo. The shift marks an improvement on the 15.7 percent vacancy rate a year earlier and the 17.8 percent rates of 2001 and 2002.

A glut of available office space has stymied the office market since the dot-com bust and 9-11 terrorist attacks. New office buildings constructed during the height of the tech bubble soon found themselves lacking tenants, and existing spaces struggled to hang on as businesses trimmed staff.

The latest report indicates some reason for hope — the national vacancy rate still hovers above 15 percent — but local officials aren’t declaring victory just yet.

“It’s a pretty remarkable improvement,” said Kelvin Heck, senior vice president and principal for the Lawrence office of Grubb & Ellis/The Winbury Group, which handles industrial, office and retail real estate transactions. “But I wouldn’t over-read into that rate change that you ought to go build a bunch of spec(ulative) office space. I think they shouldn’t. We’re not there yet. The market is still more of a tenant’s market today than it ought to be for a balanced marketplace.”

‘It’s getting better’

But, Heck said, there are signs of a turnaround:

• Of the 2.65 million square feet of professional office space available in town, only 313,000 square feet is vacant. That’s down from as much as 410,000 square feet left open a few years ago, when even less total space was available.


The city's office-leasing market is showing signs of recovery after a tough few years. The office vacancy rate was 11.8 percent in 2004, down from 15.7 percent a year earlier. Mar Lan Construction relocated and Midland Hospice Care expanded into the Berkeley Tower, 1008 N.H., during the past year.

• Leasing rates have been flat in recent years, and he expects tenants to be able to expect some lower rents and other concessions for the next two years. A year ago, the “tenant’s market” wasn’t expected to lift until 2010.
• With companies starting to hire more employees and new companies expanding in Lawrence, such demand — even modest — is good news for a market that has struggled during the downturn.

Greg DiVilbiss is enjoying the increased interest in his high-profile space: a 55,000-square-foot office building at Wakarusa Corporate Centre near 18th Street and Wakarusa Drive. The building — the first of four or five planned in a $40 million development — last year added its second tenant, an accounting firm.

The 3-year-old building now has 8,000 square feet occupied, with prospects for more rising with the passing of each new positive economic report.

“It’s getting better,” said DiVilbiss, of The Bristol Groupe, which owns the development. “The economy needed to perk up, and it has. The national companies are starting to get more confident. People are on an up note.”

DiVilbiss was among 120 other developers, contractors, bankers, planners, architects, attorneys and other professionals to hear about the report during a presentation Thursday at the Lawrence Arts Center. Heck hailed the office results as the biggest shift in the market.

6News video: Report says retail still hot in Lawrence (01-20-05)

“Anyway you slice it, this is a remarkable, dramatic move,” Heck told the crowd.

Industrial weakness

Also included in the report:

• Vacancies for industrial space spiked at 9.3 percent last year, as 774,000 square feet sat vacant. That was up 349,000 square feet from a year earlier; 320,000 square feet of the available space is traced to the summertime closing of E and E Display Group.

Grubb & Ellis/The Winbury Group expects much of the vacant space to be leased during the coming year.

Steve Glass is counting on it. He’s a partner in North Town, a business-condo concept going up along the west side of North Second Street in North Lawrence.

The project is replacing a former asphalt plant with a 58,500-square-foot building poised to accommodate contractors or other businesses looking to own their own space.

“We’re relatively optimistic,” Glass said. “It’s not going to be (as good as) 1998 all over again, but it will be better than 2004.”

• Retail space remains the city’s hottest commercial market, with the vacancy rate at 5.1 percent. That compares with 5 percent a year earlier and 5.2 percent in 2002. Nearly half of the 279,000 square feet available for lease is along South Iowa Street, where the former Payless Cashways and Total Fitness Athletic Center remain available.

Allison Vance Moore, of Grubb & Ellis/The Winbury Group, told the crowd that South Iowa Street and downtown Lawrence would remain “vibrant,” and that demand for new space would continue to exist — particularly for stand-alone buildings and shops in centers that are anchored by a grocery store or larger, “big-box” stores.

Pressure to add such projects will come at the eastern and western edges of town, she said, where new homes continue to go up.

“After all,” she said, “retail follows rooftops.”