In Harmony Painting employees work on a house on Bullene Avenue in March. From left is Loren Wadsworth, Jim Miller and Brandon Davis. Wadsworth says he has has done far more repaints lately than painting new houses.

From left, Loren Wadsworth and Brandon Davis paint a house. Home sales fell by 8 percent last year in Lawrence, following up on an even larger 10 percent drop a year earlier.

At one point not all that long ago, Lawrence city planners were talking about needing to move ahead briskly with planning for a new sewage treatment plant south of Lawrence – the key piece of infrastructure needed to support the addition of and expected 20,000 new residents south of the Wakarusa River during the following quarter century.

My, how things change.

The growth-driven optimism from earlier this decade has been replaced with fears of moving too fast for the city’s now snail-paced expansion.

Original plans for building the treatment plant in time to be operational by 2011 now are being pushed back a year or two, or even perhaps longer, as the city’s historical growth rate languishes amid a market beset by a shortage of available industrial sites, worries about demand for commercial space, and uncertainty regarding timing for a return to the familiar rise in residential sales.

To hear Kelvin Heck tell it, slowing down the treatment project doesn’t make much sense. As a commercial real estate broker, he knows that the last thing anyone needs to hear when considering bringing a new company to town, building new offices to occupy or filling vacant land with new residential rooftops is that the toilets won’t flush.

“If there’s one thing that development needs – besides water – it’s sewer,” Heck told a group of bankers, business owners, government leaders and others during a real estate forecasting event earlier this year. “If you don’t build it, they surely won’t come.”

Heck and his colleagues at Grubb & Ellis|The Winbury Group in Lawrence, compiled a forecast for this year’s real estate market in town. Among its predictions:

Office space

For office needs, the agency expects vacancy rates to continue to decline. Only about 9.5 percent of the city’s office offerings should be vacant by year’s end, which would be down slightly from 2007 and below the vacancy rate of more than 14 percent recorded in 2006. Vacancies had approached 18 percent in 2002.

The shrinking vacancy rate comes as developers shy away from putting up new buildings without having secured tenants first, Heck said. And as vacancies decline, asking rents will be expected to rise.

Industrial space

The availability of industrial space remains a major concern, as Lawrence vacancy rate is lingering at about 3.4 percent – below the 6 percent rate in the Kansas City metro area and the nearly 8 percent rate recorded nationwide, said Marilyn Bittenbender, a Grubb & Ellis broker who follows industrial property.

Even more troubling, Bittenbender said: Lawrence lacks enough large tracts of industrial land to accommodate a major employer, should one decide to locate in town.

Of the more than 4 million square feet of industrial space located in what is known as the North Iowa Street corridor – an area home to the Kmart Distribution Center, Berry Plastics and other large-scale operators – there is less than 10,000 square feet of space available for lease.

“Without any new product, more businesses will be forced to look outside of Lawrence,” Bittenbender said.

Retail space

Vacancies in Lawrence’s retail spaces will be expected to rise to 6 percent this year, up from just over 5 percent a year ago but still below the 7.5 percent forecast nationwide, said Allison Vance Moore, who follows the retail market for Grubb & Ellis.

Continued difficulties with the housing market, credit cards, other debt, unemployment and energy prices all can be expected to contribute to a rise in retail vacancy, she said.

Nearby competition, such as The Legends shopping area in Kansas City, Kan., also will be expected to affect “overall retail velocity,” she said.

New projects will be expected to add retail spaces to the mix, she said. Among them: a new Wal-Mart planned for the northwest corner of Sixth Street and Wakarusa Drive, and the planned Bauer Farms project across Wakarusa Drive to the east.

Residential market

Grubb & Ellis doesn’t track residential sales, but McGrew Real Estate does.

And Mike McGrew, the agency’s president and chief executive officer, said that he was expecting this year’s results to show improvement compared with those of the past two.

Home sales fell by 8 percent last year in Lawrence, following up on an even larger 10 percent drop a year earlier.

“We’re cautiously optimistic that the worst is behind us,” McGrew said. “The fact is, Lawrence has weathered lots of storms in the past, and we’re going to weather this one.”

The 1,431 sales recorded last year ranked as the lowest number since 1,368 sales were completed in 1997. Sales had been on the rise for much of the past decade, peaking at 1,749 in 2003 before dropping each year since.

Despite the slowdown in sales, average sale prices did not indicate a drop. The average price paid in 2007, McGrew said was $201,452, up 5 percent from a year earlier, McGrew said.