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Empty storefronts become a bit more prominent in Lawrence, new report shows; vacancy rate hits recent high

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With all this talk of a federal government shutdown, the natural question is whether it would include presidential cellphone service? I don’t have insight into that, but this is the time of year that Lawrence leaders look at another type of shutdown: how many businesses have closed and how many empty storefronts are left as a result. The short answer is vacancy rates were up a bit in 2017.

The Lawrence branch of the commercial real estate firm Colliers International puts together a report on vacancy rates of retail, office and industrial space throughout Lawrence. The retail vacancy rate frequently is a topic of conversation in some political circles, as Lawrence is never very far away from a debate on whether new retail projects should be allowed to locate in town.

This year’s numbers probably will fuel some of that. The retail vacancy rate climbed to 7.5 percent, up from 5.2 percent at the end of 2016. While that is not a huge jump, it is Lawrence’s highest retail vacancy rate in the last decade, according to the Colliers report. The 7.5 percent vacancy rate also is higher than the national and Kansas City metro averages. The K.C. retail vacancy rate is about 6 percent, according to Colliers, while the national average is about 4.5 percent. This is the first time in the last decade that Lawrence’s vacancy rate has been higher than the Kansas City vacancy rate.

The areas with the highest vacancy rates are perhaps predictable: East 23rd Street and West 23rd Street. Why predictable? Traffic patterns are changing as a result of the South Lawrence Trafficway being completed. While I haven’t yet seen specific numbers, it is reasonable to surmise that traffic on 23rd Street is not going to grow the way it used to. High traffic volumes are important to many types of retailers.

Vacancy on East 23rd Street stood at 16 percent, while the rate was 10.5 percent for West 23rd Street. Here’s a look at retail vacancy rates for other parts of town:

• Downtown: 7.5 percent

• South Iowa Street: 7.9 percent

• Sixth Street: 4.7 percent

• West Lawrence: 4.6 percent

• North Lawrence: 3.3 percent

• University district: 3.8 percent

Colliers officials, however, said interest levels are strong from retailers looking to come into town. This survey includes some vacant space that already has had deals announced to fill it, such as the former J.C. Penney store, which is being remodeled to house Hobby Lobby, Marshalls Home Goods, and Five Below. So, by next year’s report, that property won’t show up as vacant space.

Lawrence's J.C. Penney store, 3311 Iowa St., is shown in this aerial file photo from July 2014.

Lawrence's J.C. Penney store, 3311 Iowa St., is shown in this aerial file photo from July 2014.

But the fate of a few other big, empty spaces is still unclear. The former Hastings building at 23rd and Iowa is still empty. The Hobby Lobby building at 23rd and Ousdahl will be empty once Hobby Lobby moves to south Iowa Street. And despite an announced deal, Price Chopper is still awaiting city approval to open a grocery store in the former Borders bookstore building at Seventh and New Hampshire. How those three buildings fill up will go a long way in determining the vacancy rate for 2018.

This file photo from June 2016 shows the Hastings bookstore and entertainment retailer at 1900 W 23rd St. The building is currently vacant.

This file photo from June 2016 shows the Hastings bookstore and entertainment retailer at 1900 W 23rd St. The building is currently vacant.

The former Borders building, located at Seventh and New Hampshire streets, in a file photo from 2012.

The former Borders building, located at Seventh and New Hampshire streets, in a file photo from 2012.

There are also a few large spaces in downtown Lawrence, although I’m told there are several deals close to being announced. I don’t have great information on those, although I will pass along that there are certainly a couple of microbrewery projects that have been looking for space around town. In downtown, some of the large spaces looking for tenants include the former Buffalo Wild Wings location, the former Buckle clothing shop, the former Pro Print location and the ground floor of the former M&M Office supply building. What if a brewery went into that location, right across the street from The Free State Brewing Company? No one would ever get any work done in the 600 block of Massachusetts Street again.

This file photo from January 2017 shows the former location of the Buckle, 805 Massachusetts St.

This file photo from January 2017 shows the former location of the Buckle, 805 Massachusetts St.

I’ll let you know if I hear other details. In the meantime, here’s a look at some of the other vacancy rate information from the Colliers report:

• The vacancy rate for office space stood at 8.9 percent, up from 7.5 percent at the end of 2016. Lawrence’s rate is well below the peak vacancy rate that occurred in 2009, when vacancy rates were near 14 percent. Today’s rate is about equal to the Kansas City office vacancy rate, while it is less than the national average of about 12.5 percent. The report notes, however, downtown does have a 20 percent vacancy rate, as new office space has developed along the New Hampshire Street corridor.

• The industrial vacancy rate hit an all-time low in Lawrence at 1.9 percent, down just slightly from 2016 totals. The Colliers report said there are only 10 true industrial buildings available in Lawrence currently, and all of them are less than 20,000 square feet. Eight of them are less than 10,000 square feet. The industrial market has been a slow one in Lawrence. Lawrence leaders are optimistic that plans for a new industrial building in the Lawrence VenturePark will serve as a magnet for new companies. As we’ve reported, Kansas City-based VanTrust Real Estate has been awarded incentives to build a 152,000 square-foot industrial building in the park. No tenants have yet been announced, but I’m told marketing of the planned building has begun.

Comments

Andy Craig 4 months ago

Aren't the old Pizza Hut and Post Office buildings on 23rd Street still unoccupied as well?

Dorothy Hoyt-Reed 4 months ago

And will this force leases down? Probably not. Used to work that way, but now an empty building is just a tax write off.

Armen Kurdian 4 months ago

You really don't know anything about business or real estate do you?

Do you really think someone would rather keep a building vacant than have a tenant in there generating revenue?

Do you even know how lease values are calculated and what goes into it and how they are negotiated?

Dorothy Hoyt-Reed 4 months ago

Then explain why rents don't go down?

Armen Kurdian 3 months, 4 weeks ago

There's no data in the article regarding leases rates, cost/sqft, terms, or any other information that would allow you to draw that conclusion from this article. But in most cases, banks must approve reductions in rent on commercial leases, and that process can take months. So either it's taking awhile, the increase in vacancy rates has to do w/more than just lease values, or the owners/managers aren't taking action the way they should. Or it could be something else. Or maybe rents are coming down.

Ken Schmidt 4 months ago

Armen, with all due respect, whatever Dorothy's knowledge of commercial transactions is, she has a valid point. The prices which businesses pay to rent in this town far out-pace anywhere in the state on average. When a retailer has to pay nearly $4K per month to rent a location downtown, yes, prices are too high. There is a reason so many small businesses cannot make it on Mass St. Part of it can be contributed to poor business plans, but in the end, if income does not match expenditures, you're back working from home.

Armen Kurdian 4 months ago

Nevertheless the calculation of rent/sqft for commercial space depends on a lot of factors, including property taxes, insurance, and most can't make any changes w/o approval from the banks. Not only that, but business owners can always demonstrate lower revenues if that's the case to negotiate a lower lease. Lease values tend to rebalance out to what the market will support, they have to. Too low and the owner / manager cannot cover costs. Too high and the business fails.

Dorothy simply decided that she would throw a barb at property owners because she somehow things it's more financially beneficial to have property that is vacant and costing you money than rented and making you money. it's just typical of her mentality that anyone making a profit must be doing something wrong or nefarious.

Dorothy Hoyt-Reed 4 months ago

Perhaps they should try selling the property, if they can afford to run it. How are they making any money leaving it empty. Maybe I don't know much about being a landlord, but I know that I would want someone in there, and not leave it empty. Some money is better than none. Why don't they negotiate with the banks? Obviously they must have paid too much for it.

David Klamet 4 months ago

Armen, You are making the assumption that the owners and banks are rational actors. In the long run, they have to be. in the short run, they are frequently not.

For example, when the housing bubble burst, banks were slow to approve deals to sell properties they had foreclosed on. These properties often became damaged and their value reduced because they were very slow to act.

So, I would say that there is historical precedent for what Dorothy has to say.

Armen Kurdian 3 months, 4 weeks ago

But that's in no way to say someone who owns real estate thinks it's better to hold it for a loss than it is for it to generate revenue. There could be any number of things going on, the article only says, "Vacancy rates are going up," w/o hardly any other information or numbers or any supporting data to support any type of rational conclusion.

I have experience in rents, both residential and commercial and am aware things can take time, managers and banks tend to live in the 1-2 year past, and that's just human nature. Or maybe that's not the case at all here and something else is going on.

Chris Ogle 4 months ago

I don't understand how a vacant building benefits the owner. It may be a tax loss, but I think a business owner would benefit by making a profit and pay taxes. Maybe I just don't get it.

Armen Kurdian 3 months, 4 weeks ago

No, you're right. Unless they plan on selling it or tearing it down, or are doing some kind of upgrade / modification. But just to sit & hold it doing nothing, no, you get it just fine.

Richard Andrade 4 months ago

Prices are high downtown because it is an area that offers very high foot traffic virtually all day, every day. That provides a business both potential customer source and visibility. These are and have been, the Holy Grail of every brick-and-mortar business forever and ever amen.

Dorothy Hoyt-Reed 4 months ago

But then why are there so many vacancies? For example, there used to be a florist on the corner of 11th and Mass. The owners raised their rent so much, and so suddenly, not a gradual raising, that they couldn't afford to stay there. I haven't been by there recently, but the last time I drove by, it was still empty. If it's such a sought after area, then people should be lining up to lease the space.

Michael Kort 4 months ago

Could you fit all of the cars parked on Mass between 6Th and 11th St into the parking lot at Walmart on South Iowa ?................but people leave Walmart with shopping carts full of stuff.....and that, Target, Home Depot, Menards, etc brings people into the area in cars....not that there is not an internet where you can shop a huge store of specialty this or that, that is not exactly helping anyone who wants to go into the specialty small shop business any where .

Don't know about Lawrence but some landlords elsewhere not only want rent but a % of your gross profits as well and you do a remodel of the space on your own dime with contractors landlord style demands and costs that can get out of hand .

Real estate investment companies that hold land nation wide could play by a very different logic than a local owner........they could have winners whose earnings are offset by loosers that they are too big to care about.........explain all of the absentee out of town landlords in KCMO who destroy neighborhoods right and left with abandoned properties that become drug infested vacant homes because no one at city hall there even knew how to contact the real owners on properties let to go to hell, to fine them hiding behind corporate ownerships from fines............the city condemns the property and has to tear them down or find a one dollar buyer who can prove enough $ solvency to rehab them or whatever ?

This is also CAPITALISM.......and there will be retail winners and loosers......and some landlords are delusional as to what they can squeeze out of a storefront tenant ,...... or that somehow their delusions, banking constraints or lack of super earner tennants to rent their spaces, are all the cities problems to fix ?

Richard Heckler 4 months ago

America is over stored which is created by over loading the markets which promotes economic displacement ...... successfully.

Kaylen Peterson 4 months ago

Dorothy, where did you hear that rent story about the florists?

That multi-storefront building at 11th and Mass is undergoing a massive restoration. The soda shop had to move, too, though they are just down the street.

Maybe rent prices went into why the florist decided to move away from downtown but that building isn't vacant from lack of interested tenants.

Dorothy Hoyt-Reed 3 months, 4 weeks ago

The florist moved long before any renovations.

David Holroyd 4 months ago

Dorothy should enlighten herself on the taxes on commercial buildings. She would find the answer.

And a florist downtown doesn't realy have walk up business. Florist make deliveries. They can locate anyplace. If the truck moves, the delivery can be made.

Vacant buildings on 23rd street are likely to stay vacant because the lots are not deep enough...and the buildings cannot be enlarged. Unless you have a situation like Long Johns that is now something else. And those conversions are becoming more scarce.

What constitutes rent? A mortgage payment a property tax payment, a management fee if the property is managed by someone other than the owner, and the matter of insurance as well. . Do the math.

Why doesn't Chad write a story about a building sitting empty? He can find the taxes, he can find the mortgage, he can find the minuses of the location and why the property is not desirable. And then there is also the possibility of Dr. McCullough and his office and the need for rezoning.

What happened to the indoor storage units that were to be behind Arby's?

Dorothy seems to think that an owner of a vacant building gets a tax write off> I would like to use her accountant....:)

DOROTHY, you cannot write off LOSS OF RENT. A write off is either a tax credit or a tax deduction. There is a difference. Do you write off your property taxes...OR do you claim them as a deduction and save only the percentage of the tax bracket you are in?

Please let me know who your tax "guy" or "gal" is...

If a vacant property benefitted the owner....all properties would be left vacant..

Sadly, many commercial properties would be better torn down in Lawrence and taken off the tax roll. The owners would really benefit..but then to rebuild on the site, Dr. McCullough makes it darn near impossible with all the impositions on the property owner.

A vacant lot would then be treated as "agricultural" and we know how that saves money!

Ask Bob Schumm....Chad you can help refresh folks memories...!!

Gary Stussie 3 months, 2 weeks ago

The GOP Tax Plan cuts the corporate tax rate (35 percent to 21 percent), but many small business owners will enjoy a tax break of their own in the form of a 20 percent deduction of business income.This is money they won’t have to pay taxes on.

The 20 percent deduction is available to the majority of small businesses owners who classify their earnings as “pass-through income.” That means they pay taxes based on the owner’s personal tax rate. This includes everyone from restaurant owners to sole proprietors who are self-employed, such as Uber drivers and freelancer writers.

That may help fill up those empty storefronts!

MAGA

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