New report says local retail vacancy rates improve some, but still higher than in KC; office vacancy soars
photo by: Nick Krug
The amount of vacant retail space in Lawrence continues to be above the U.S. and Kansas City averages, and now the amount of vacant office space in town also has soared, according to a new report.
The Lawrence branch of the Colliers International commercial real estate firm has released its 2018 report measuring a variety of vacancy rates in Lawrence. There was some good news on the retail front, as vacancy rates fell slightly last year, but those gains were more than offset by a surge in vacancies in the office market. The vacancy rate of office space in Lawrence now is at its highest level since 2009.
Here’s a look at some of the numbers:
• The overall retail vacancy rate in Lawrence is 6.8 percent. That’s down from about 7.5 percent in 2017. However, Lawrence’s vacancy rate continues to be higher than Kansas City’s, which is at about 5.5 percent, and the U.S. average, which stands at about 4.5 percent. It has been unusual for Lawrence to have higher retail vacancy rates than Kansas City and the U.S. From 2007 to 2016, Lawrence’s vacancy rates were below those averages. However, 2018 marks the second year in a row that Lawrence has had higher-than-average vacancy rates in the retail sector. In total, Lawrence had 450,000 square feet of vacant retail space out of a total of about 6.6 million square feet.
• The retail vacancy rate for downtown was up only slightly in 2018. It stands at just under 7.7 percent, compared with 7.5 percent in 2017. That number, though, is only a snapshot. Retail vacancy rates change quickly in downtown. I would guess there are times the vacancy rate in downtown was higher than that during the year.
• Other areas in town actually have seen more dramatic changes in vacancy rates. On the positive side, the vacancy rate on south Iowa Street dropped, as the former J.C. Penney building redeveloped with new tenants. The south Iowa Street vacancy rate is now 4.5 percent, down from about 7.9 percent in 2017. The area of town with the highest vacancy rates is 23rd Street. West 23rd Street has a vacancy rate of 14.5 percent, which is up from 10.5 percent in 2017. East 23rd Street has a 16 percent vacancy rate, which held steady from the prior year. Other areas include: Sixth Street, 5.25 percent, up from 4.7 percent; west Lawrence, 5.3 percent, up from 4.6 percent; North Lawrence, 1.3 percent, down from 3.3 percent; university district, 2.5 percent, down from 3.8 percent.
• The vacancy rate for office space in Lawrence stood at 12.1 percent in 2018. That is the highest office vacancy rate since 2009, when Lawrence was still struggling with the economic downturn. In 2017, the office vacancy rate was 8.9 percent, so the vacancy rate took a jump of more than 3 percentage points last year. That wasn’t the case elsewhere. Vacancy rates in both the Kansas City market and the U.S. as a whole dropped in 2018. This is the second year in a row that Lawrence’s office market has significantly underperformed the Kansas City and U.S. averages. The result is that Lawrence used to have an office vacancy rate that was significantly lower than both the U.S. and KC averages. Now, Lawrence’s office vacancy rate is higher than Kansas City’s, which is at about 9 percent, and is about equal to the U.S. average.
• Downtown has the highest office vacancy rate in the city as office space in places like the former Journal-World press building and Allen Press properties continue to be vacant on both ends of Massachusetts Street. The vacancy rate was at 28.4 percent in downtown, up from about 20 percent a year ago. There was about 250,000 square feet of vacant office space in the downtown district in 2018, according to the report.
• The industrial vacancy rate increased to 3.2 percent, which was up from a record low of 1.9 percent. Lawrence industrial vacancy rates continue to be well below the vacancy rates of Kansas City and the U.S. average. Kansas City is at about 6.5 percent and the U.S. is at about 4.75 percent. Lawrence’s rate increased, in part, because the new 153,000-square-foot building by VanTrust Real Estate was completed in Lawrence’s Venture Park. The building was constructed on speculation, meaning it doesn’t yet have a tenant. Economic development leaders have said the rising vacancy rate is positive because 2017’s rate of 1.9 percent was an indication there was too little inventory to show prospective businesses. Even with the increase, Lawrence has only about 300,000 square feet of vacant industrial space out of about 9 million total square feet.