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As planners debate Menards project, new study finds retail vacancy rate at 7.2 percent citywide
Let the number games begin. As we’ve previously reported, the Lawrence-Douglas County Planning Commission is set to debate a proposal by Menards to locate a new store adjacent to Home Depot near 31st and Iowa streets.
As we’ve also reported, one of the factors that planners are supposed to take into consideration when considering such large retail projects is the city’s retail vacancy rate.
But at the time Menards filed its plans with City Hall, the last time the city had conducted a retail vacancy rate study was in 2010.
Well, there are now new numbers. The city recently has completed its most recent Retail Market Report, which looks at vacancy rates as they were in December 2012. Here’s a look at some of the findings:
• Citywide, the retail vacancy rate was 7.2 percent, down from the 7.3 percent found in the city’s 2010 report and up from the 6.9 percent found in the 2006 report. In other words, there hasn’t been much change in the overall number.
• Downtown had a vacancy rate of 9.4 percent, up from 9.1 percent in 2010; South Iowa had a vacancy rate of 7.8 percent, up from 2.7 percent; East 23rd had a vacancy rate of 10.4 percent, down from 13.6 percent; West 23rd Street had a vacancy rate of 6.1 percent, down from 6.7 percent.
• The 19th and Haskell area had the highest vacancy rate in the city at 30.2 percent. North Lawrence was second at 16.4 percent, although the numbers indicate a turnaround is happening in the area. In 2010, it had a vacancy rate of 27.5 percent.
• Turnarounds happened in a couple of other areas too. The Bob Billings Parkway and Wakarusa area has a vacancy rate of 7.8 percent, down from 26.4 percent in 2010.
• The report also provides information about the type of retail uses in downtown. The report found 116 merchant-based retail businesses in downtown, which is down from 126 in 2006. Restaurant and beverage oriented uses grew to 83, up from 68 establishments, during the same time period.
The report is an interesting one for people who watch Lawrence’s commercial real estate market. Perhaps the most interesting part about it, though, is how different it is from a private report that was put together during roughly the same time period.
The Lawrence office of Colliers International released a report in January that measured vacancy rates for late 2012. It found an overall retail vacancy rate of 5.4 percent, compared to 7.2 percent in the city’s report.
In downtown, Colliers found a vacancy rate of 4.4 percent compared to 9.4 percent in the city report.
The differences, I believe, come down to the methodology of the two reports. I don’t know all the differences but I think a lot of it comes from how the two studies define retail space. For example, the city study counts some industrially zoned space as potential retail space because the city’s development code would allow for retail to be located in the space. Also, there are places like the former Riverfront Mall building. Whether that space is counted as retail space, which is what it was built for, or office space, which is how it is pretty much being marketed now, makes a difference in the vacancy rate calculations.
Vacancy rates: They’re like my kids saying they’ve “cleaned” their rooms. It is a subject where interpretations and definitions matter.
As far as the Menards project goes, we’ll see how much weight planners, and ultimately city commissioners, give to the vacancy rate subject.
The city’s comprehensive plan, Horizon 2020, says large retail projects shouldn’t be approved, if there is evidence the project will push the city’s overall retail vacancy rate above 8 percent.
If the 190,000 square foot Menards store and the 65,000 square feet of outlying parcels — restaurants and other smaller retailers surrounding the store — were built and then were entirely vacant, the city’s vacancy rate would rise to 9.7 percent. It would be odd, however, for Menards to build a store and then not occupy it, but technically that is the assumption city planners are supposed to make under the rules of Horizon 2020.
Several planning commissioners the last time they considered this issue, however, indicated concern with making that type of assumption. The city also is in the process of rewriting that portion of Horizon 2020, but those changes haven’t yet been made. So, it is possible that planners may discard the idea that they should assume the new Menards building will be vacant after it is built.
Staff members put together another calculation that shows what would happen if the Menards building is occupied but all of the 65,000 square feet of surrounding retail is vacant. The result would be the citywide vacancy rate would rise to 7.7 percent, which is still below the 8 percent threshold that Horizon 2020 says is critical.
So, we’ll see what comes of all this. I’m not sure how much this retail market study is going to play into the Menards decision, but this report likely will play into future debates about whether Lawrence has too much or too little retail space for a community its size.
The Menards discussion will take place at 6:30 tonight at City Hall.