Robust Recovery in 2010 Will Just Return U.S. to Mediocrity. NAI Global Chief ... NAI Isaac compiled and analyzed data o
Commercial Real Estate Market Lexington, Kentucky Mid Year 2010 Report Commercial Real Estate Vacancy Overview Property Type
Vacancy Rate
6 Month Change
9.02%
⇓ Decrease 14.40%
SUBURBAN OFFICE
17.31%
⇑ Increase
CBD OFFICE
14.53%
RETAIL
37.32% ⇑ Increase
5.55% INDUSTRIAL
15.15%
⇑ Increase
32.83% Survey includes nearly 400 commercial properties comprising over 29 Million SF
Robust Recovery in 2010 Will Just Return U.S. to Mediocrity NAI Global Chief Economist Dr. Peter Linneman Strong, steady economic growth over the next two years will just return the U.S. economy to a pre-2008 level, giving us back what we needlessly lost due to government-induced panic and poor lending practices. The key for the real estate sector is job growth, as a recovery without jobs does not fill buildings. We anticipate that the next three years will continue to see average job growth of 250,000 jobs per month, for a three-year job increase of at least 9 million jobs by early 2013. That is robust job growth, but it is important to remember that our forecast would leave us with almost the same number of jobs in mid-2013 as existed at the beginning of September 2008. Even with a robust recovery adding 9 million jobs over the next three years, we will still have an anemic unemployment rate of 7%. Hence, we expect a robust rebound to mediocrity.
Where Does Lexington Fall on the Recovery Map? Al Isaac, President, NAI Isaac Commercial Properties Lexington’s commercial real estate market should rebound more rapidly than the country as a whole due to significantly decreased new construction. Decreased new construction limited supply which contributed to the market not being over-built in most categories. The suburban office market has shown the largest vacancy increase which correlates to the suburban office market having had the largest amount of new construction beyond demand during the last several years. Lexington’s commercial real estate market will continue to improve as job growth increases and existing inventory is absorbed.
Isaac
Commercial Real Estate Services, Worldwide.
Lexington, Kentucky Mid Year 2010 Market Report commercial real estate activity in the Lexington Metropolitan area highlights activities for the first half of 2010. This report provides an in-depth review of the commercial real estate market, evaluates the market trends and how they may impact future performance. NAI Isaac compiled and analyzed data on nearly 400 commercial properties representing over 29 million square feet of office, retail and industrial premises, of which, approximately 3.8 million square feet is currently vacant.
Retail Vacant Space – 9.02% Yr End ’09 Mid Yr ‘10
Al Isaac President Years Experience: Over 27 years Specialty: Retail & Office Areas of Interest: Investments
Paul Ray Smith, Jr. Executive Vice President Years Experience: Over 24 years Specialty: Retail & Office Areas of Interest: Power & Community Centers Bruce R. Isaac Senior Vice President Years Experience: Over 24 years Specialty: Retail, Office & Industrial Areas of Interest: Sales, Leasing & Land Dev’t
Overall Decrease ⇓ 14.40%
John P. Miller Broker Associate Years Experience: Over 15 years Specialty: Mixed Use and Retail Areas of Interest: CBD Development
13.1%
600,000
12.5%
8.3%
400,000 300,000 200,000 100,000 0
0% 0% Regional Mall
Neighborhood Center
Community Power
Office Vacancy– Suburban 17.3% | CBD 14.5% Yr End ’09
900,000
Mid Yr ‘10
800,000
Suburban Office Overall Increase ⇑ 37.32%
700,000 600,000 500,000 400,000 300,000
CBD Office Overall Increase ⇑ 5.55%
17.9%
16.1% 16.4%
10.6% 18.1% 18.5%
200,000 100,000 -
11.3% 9.1%
Sub Office Sub Office Class A Class B
CBD Office CBD Office Class A Class B
Industrial Vacant Space – 15.15% Yr End ’09 Mid Yr ‘10
Jim Kemper Vice President Years Experience: Over 19 years Specialty: Retail & Office Areas of Interest: Power & Community Centers
10.7%
500,000
Lexington is uniquely positioned to continue its steady growth and weather the economic uncertainty facing the nation, with an economy fueled by a well-educated workforce, medical service, the University of Kentucky, agribusiness and tourism.
Senior Contributing Editors
700,000
Vacant SF
NAI Isaac Commercial Properties’ Mid Year review of
700,000
500,000
Overall Increase ⇑ 32.83%
13.5%
600,000
400,000
19.3%
10.2%
15.5%
300,000
19.4%
200,000
12.1% 5.8% 5.6%
100,000 0 Distribution
Manufacturing
High Tech R&D
Bulk Warehouse
Retail The total GLA of the surveyed retail centers in the Lexington area is approximately 11.8 million SF in 102 centers. The bulk of the retail center inventory lies within the Community/Power Centers category which accounts for approximately 6.1 million SF of the total GLA. Lexington continues to be a desirable market for national retailers. The slowdown in new construction has kept the market in a good occupancy range and most of Lexington’s shopping centers have weathered the recession well and remain in good shape. Retail vacancy decreases 14% as tenants take advantage of more flexible occupancy terms.
Buildings Regional Malls
GLA (SF)
Available (SF)
Available (%)
1
1,214,135
0
0%
Neighborhood
83
4,416,773
552,368
12.51%
Community/ Power Ctr
18
6,141,443
509,797
8.30%
102
11,772,351
Total
1,062,165
9.02%
Office Rising vacancy was the continued trend for the Lexington suburban office market in the 1st half of 2010. Vacancy saw a sharp increase to climb above the 17% mark from 13% at the close of 2009. This represented an increase of over 314,000 SF of available space - a 37% increase, with the bulk of the vacancy derived from 3 properties in the Newtown Pike Corridor. While activity is increasing, the demand hasn’t kept pace with the surrender of some larger blocks of space. While the Lexington CBD office market is composed of only 4 Class A buildings, the square footage is nearly the same as Class B product. The downtown Lexington market saw a slight increase in vacancy during the 1st half of 2010, reporting 15% vacancy, representing over 373,000 SF of availability. Most leasing activity in the 1st half of 2010 was due to tenant renewals and relocations, but a sharp rise in vacancy will keep the suburban office market competitive for the balance of the year.
Suburban Class A
Buildings
GLA (SF)
42
1,801,422
Available (SF) 290,102
Available (%) 16.10%
Class B
116
3,884,840
694,317
17.87%
Total
158
5,686,062
984,419
17.31%
CBD
Buildings
GLA (SF)
Available (SF)
Available (%)
Class A
4
1,229,684
222,524
18.10%
Class B
25
1,338,284
150,529
11.25%
Total
29
2,567,968
373,053
14.53%
Industrial This market continues to experience the effect of the US recession, ending the 1st half of 2010 with rising vacancy. Overall vacant space among industrial facilities throughout Lexington increased to almost 1.4 million SF, a 15% vacancy. The bulk warehouse market, Lexington's largest industrial market, totals over 4.4 million SF of product with over 602,000 SF vacant. Development will remain minimal for several quarters until the jobs lost since the start of the recession begin to be replaced and sustained demand returns. Industrial vacancy climbs with recovery dependent upon steady job growth and an increase in production pushing demand.
Buildings
GLA (SF)
Distribution
60
2,654,894
513,056
19.32%
Manufacturing
14
1,090,271
210,959
19.35%
High Tech/R&D
21
889,782
49,668
5.58%
Bulk Warehouse
Total
Available (SF)
Available (%)
15
4,452,210
602,610
13.54%
110
9,087,157
1,376,293
15.15%
Committed to Central KY. Connected to the World. Committed to Central Kentucky. NAI Isaac is known for its market leadership, knowledgeable and experienced professionals and commitment to customer service. As a full service commercial brokerage company, NAI Isaac offers a comprehensive range of real estate services along with the experience required to handle your commercial real estate needs. Locally, we exclusively represent over 9 million square feet of commercial property with a combined market value in excess of $900 million.
Connected to the World. As the exclusive local representative of NAI, the world's most extensive real estate services network, NAI Isaac’s affiliates are virtually everywhere – from Los Angeles to London, Memphis to Mexico City, and Taipei to Toronto – in over 325 offices in 55 countries with 5,000 real estate partners. Our affiliation with NAI keeps our firm on the leading edge of the industry, while allowing us to maintain our local ownership and hometown loyalty.
Build on the Power of Our Network.™ The NAI Agent Team focuses on you, helping you make decisions that will benefit your business. That’s how you know that when it’s time to lease, buy, sell or invest – NAI Isaac can help you navigate successfully through real estate transactions and achieve your goals, whether you’re a growing Central Kentucky business or a large multinational firm.
Isaac
Commercial Real Estate Services, Worldwide.
771 Corporate Drive Suite 300 Lexington KY 40503 859.224.2000 www.naiisaac.com
The data compiled in the Lexington Market Report is the legal property of NAI Isaac. Reproduction or dissemination of the information contained herein is strictly prohibited without the expressed written consent of NAI Isaac. This report contains data, including information available to the public, which has been relied upon by NAI Isaac on the assumption that it is accurate and complete. NAI Isaac accepts no responsibility if this should prove to be inaccurate or incomplete. No warranty or representation, expressed or implied, is made by NAI Isaac as to the accuracy or completeness of the information contained herein, and same is submitted subject to errors, omissions, and changes in market conditions.
