Posts tagged with Vacancy Rates
Menard’s project highlights city rule on vacant space; a look at how Lawrence ranks in state retail report
Build it, and it will be empty. That's the motto of Lawrence, at least in one way.
City planners will be reminded of that tonight. The Lawrence-Douglas County Planning Commission will consider a proposal by Menard's, the large home improvement chain, to build a 190,000-square-foot store just east of 31st and Iowa streets. As we previously reported, the city's planning staff is recommending denial of the proposal.
But you may not be aware of one of the reasons the project has received a negative recommendation: When large retail projects are proposed in the city, planners are required to look at a retail market analysis to determine what the city's retail vacancy rate will be after the project is built. The way the rules are written, the vacancy rate is to be calculated by assuming the new project will be 100 percent vacant.
So when city officials do the calculations for this project, they put aside the fact that Menard's has no plans to build a 190,000-square-foot building and then leave it empty. Instead, the city adds the 190,000 square feet of the new store onto the city's estimated amount of vacant square footage, which stood at 643,000 square feet the last time it was calculated, in 2010.
When the city planners add on the 190,000 square feet, that pushes the city's supposed vacancy rate to 8.4 percent from 7 percent — which is just above the 8 percent total that is supposed to be a red flag when it comes to vacancy rates. According to a planning staff report, if you add in the approximately 65,000 square feet of smaller retail space proposed to be built along the outer edges of the Menard's project, the vacancy rate would jump to 9.6 percent.
But the city's planning rules also suggest planners go a step further. The city staff looked at all the retail zoning that currently is in place in the city, but doesn't yet have any buildings on it. That totals about 932,000 additional square feet. The city then makes the assumption that all of that will be built, and then be completely empty. That produces a frightening vacancy rate of 17.8 percent.
Planners, of course, don't think people are going to build large retail buildings without first having a tenant to occupy them. The city's planners understand the city's building market better than most because they are on the front lines of development proposals. But already I have heard people complaining about the city's Planning Department and why it would make this type of assumption. Well, city planners get the thankless job of being a referee in the city's politically charged development arena.
In other words, the job of a planner is to apply the rules to the project — not to rewrite the rules. Rewriting the rules is the job of city commissioners, and the rule that requires the city to assume large new retail buildings are going to be vacant has been on the city's books for at least the past decade.
Its days may be numbered, though. Scott McCullough, the city's planning director, told me the process has begun to change the rule. But it won't reach the City Commission in time to be considered for the Menard's proposal.
The rule change probably will get some opposition as well. There is certainly a group of local citizens that is very convinced the city's retail scene is overbuilt. They argue that even though a new Menard's building won't be empty, the addition of that much retail space in the city will cause an approximate amount of retail square footage elsewhere in the community to go vacant. That theory is how the rule got put in place to begin with.
In other words, the way the city's rules are written right now, retail is assumed to be a zero-sum game. For every one square foot of new retail space that comes into town, you must assume one square foot elsewhere will become vacant. Maybe that is the case in some economic climates. But maybe it isn't the case in other economic conditions.
What's certain is that retail zoning requests are a judgment call. The first round of judging will begin tonight at 6:30 p.m. at City Hall, when the Planning Commission meets. Ultimately, city commissioners will make the final decision on the Menard's request.
• One other piece of information that was included in the city staff's report was a mention of a state report that ranks how Lawrence's retail scene is doing compared to other Kansas cities. It is called a “pull factor” report, and it is basically a look at how Lawrence's per capita sales tax collections compared to the statewide average. It is called a pull factor because it is assumed that cities with averages much higher than the state are “pulling” customers from other communities to shop.
It is a perfect statistic for retail developers because it can be manipulated to fit the situation. When the pull factor is low, it can be argued that more retail development is needed in order to stop the amount of Lawrence residents who go outside of the city to shop. When the number is high, it can be presented as evidence that retail demand is high and the market can support additional retail development.
But the numbers are interesting because they do a good job of showing how Lawrence's per capita spending stacks up against other cities. The most recent report, which is for the state's 2012 fiscal year, shows Lawrence's numbers have rebounded. The city's pull factor was 1.07, which means it is 7 percent higher than the statewide average. As recently as 2000, the city's pull factor was .99. Going back farther, the city hit a high-water mark of 1.13 in 2000. So, we're somewhere in the middle of the range but trending upward.
Here's a look at how other large towns in the state fared. I'll leave the analysis up to you: Lenexa: 1.52 Overland Park: 1.51 Salina: 1.47 Garden City: 1.47 Manhattan: 1.40 Leawood: 1.40 Topeka: 1.37 Hutchinson: 1.27 Liberal: 1.23 Dodge City: 1.22 Olathe: 1.18 Pittsburg: 1.13 Junction City: 1.12 Wichita: 1.11 Fort Scott: 1.09 Coffeyville: 1.08 Emporia: 1.08 Lawrence: 1.07 Parsons: 1.05 Shawnee: .93 Atchison: .89 Kansas City: .86 Newton: .87 Leavenworth; .73 Prairie Village: .64