New report shows retail vacancy rate in Lawrence is above KC and national averages; downtown ended 2022 with 10% vacancy

photo by: Nick Krug/Journal-World Photo

Downtown Lawrence is pictured in this aerial photo from December 2017.

I know that retail has bounced back in Lawrence since the pandemic. City Hall has two years of growing sales tax collections that lend evidence to the idea. (Plus, there’s been enough activity on my credit card that Visa has offered to provide me a personal trainer so that I remain healthy and able to sign checks for years to come.)

But do you know who hasn’t gotten the memo? New retailers. The community hasn’t had many new retailers enter the market lately, and the number of vacant storefronts is starting to show it.

A new report from the Lawrence office of Colliers commercial real estate found that Lawrence’s retail vacancy rate at the end of 2022 had risen from a year ago, and now is higher than both the Kansas City and national averages.

The city’s overall vacancy rate for retail spaces — which by this definition also includes restaurant space — was 6.44%, up from a 2021 rate that was just above 5%. That compares with average retail vacancy rates of less than 5% both in Kansas City and nationally. Importantly, both the Kansas City and national rates declined in 2022, while Lawrence’s increased.

The more eye-catching number, though, might be the downtown vacancy rate. It was at 10.17%, the highest of any commercial district in the city.

Allison Vance Moore, senior vice president for the Lawrence Colliers office, said there was “some fear for downtown for a minute,” following the pandemic. She said more recent inquiries from potential retailers has her feeling better about the prospects of filling vacant space, and she said some of that already is happening.

But she also told a crowd at an event last week that there are risks to any rebound that is occurring in the downtown. She said the issue of panhandling is a frequent topic among shoppers and potential retailers she converses with. She said even the perception of downtown being a spot rife with panhandling activity could be damaging to the community’s efforts to keep downtown a vibrant retail center. She urged businesses and City Hall leaders to work together on ideas.

“We need to collaborate on some solutions in a time-sensitive manner, I think,” she said.

South Iowa Street is another big retail area in the city. The Colliers report shows it is holding up better with a 4% vacancy rate at the end of the year. It does have some high-profile and large vacancies, though. The two restaurant spaces at 31st and Iowa — the former Torchy’s Tacos and On the Border locations — remain empty. The On the Border location is an example of a long-term vacancy that has existed despite being highly visible at a prominent intersection. But it also is not near a driveway where you can easily turn into from Iowa Street. I bring that up because some people use that location as evidence that Lawrence is overbuilt with restaurant space, while others argue the city didn’t allow the space to be built in a commercially sound way. (As for me, I say, let me “hold” your tacos while you two argue about it.)

The biggest new vacancy on the south Iowa strip, though, was the closing of Bed Bath & Beyond, which we reported in November. Moore said she was optimistic about that space filling soon. She didn’t provide any hints of a new retailer for the space. I haven’t heard anything definitive about a deal, but I certainly have heard that Burlington Coat Factory was showing interest in the space. Others, however, may have an interest.

The 23rd Street corridor also has a good amount of retail and restaurant space. The latest report shows it has some elevated vacancy levels too. The part of 23rd Street west of Massachusetts Street had a 7.1% vacancy rate. The part of 23rd Street east of Massachusetts Street challenged downtown for the highest vacancy rate in town at 10.16%. (Currently, due to major road construction, the best way to get to those businesses east of Massachusetts is with a cape and an “S” on your chest, so it will be important to watch whether vacancy rates improve once that 23rd road construction is done.)

Moore, though, said developers may need to be prepared to tackle renovations of several older strip commercial centers along that corridor and in other areas of town. She said there were about 50 retail vacancies in such strip centers at the end of the year.

“We might be looking for some corrections on some of those properties,” she said. “Retail is dynamic, but the real estate we have in some of those places may not have been.”

The Colliers report looked at other types of commercial vacancy rates in the city. While you would think the retail vacancy rate being higher than the national average might be the most concerning finding of the report, Moore highlighted a category that she thought was particularly troubling.

The amount of available industrial space in the city is at a record low, and that is right as a 4,000-job, $4 billion Panasonic battery plant in nearby De Soto is expected to attract lots of supplier companies that could need industrial space.

“Industrial space is kind of a sob story in our market,” Moore said.

The report found the vacancy rate for industrial space was 1.73%, down from an-already low 1.9% level a year ago. She showed the crowd at last week’s event a slide listing only nine industrial spaces as being available in the community.

“That’s a shame,” she said.

The report noted that even the big, relatively new building at VenturePark, has become fully leased, although it isn’t necessarily serving as a major employment center. The building — which was built several years ago without a tenant — now is being used as storage and warehouse space for several tenants, most recently including Berry Plastics.

Those big buildings are useful, but the community really needs industrial spaces of 15,000 square feet or less with overhead doors and loading docks, Moore said. She said what little new investment has happened in the industrial market has been rewarded. She noted that a strip building of small-to-medium size industrial spaces at 2460 Fairfield St. — it is right behind Tractor Supply — has all eight of its spaces filled.

Lawrence’s industrial vacancy rate of 1.7% is less than the Kansas City industrial vacancy rate of about 5% and the U.S. average of about 4%.

Office space is the final category the Colliers report measured. It had the highest vacancy rate of any commercial category, which is not unusual in Lawrence. The report found a 12.2% office vacancy rate at the end of the year, which is up from 10.4% before the pandemic began.

The office space that is reopening in the market is looking different, the report found. It noted that hybrid office spaces — designed for employees who work from home at times while working in the office at other times — was becoming more prevalent in the Lawrence market.

“Hybrid models are here to stay going forward,” the report said.

Some office users, though, are simply leaving town. The departure of a couple of large users helped drive vacancy rates higher in 2022. Those included Payless Shoesource closing its 18,000-square-foot office at 4910 Corporate Center Drive in west Lawrence. As we reported, the struggling shoe retailer used the space as a co-corporate headquarters as it tried to remake itself, although most of the top executives were located in Miami.

The biggest loss to the market was a call center space that became vacant. Longtime residents would remember the site as the old Sallie Mae building near Sixth Street and McDonald Drive. More recently it has been home to financial service companies such as DST and Boston Financial. The report confirmed that about 50,000 square feet of space had been vacated in that building, meaning it could become the home for a new employer. I’ll keep an eye out for any news on that front.


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