Commercial Real Estate Market
Mid Year 2010 Report
Commercial Real Estate
Property Vacancy 6 Month
Type Rate Change
RETAIL 9.02% ⇓ Decrease
SUBURBAN 17.31% ⇑ Increase
CBD OFFICE 14.53% ⇑ Increase
INDUSTRIAL 15.15% ⇑ Increase
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.
Commercial Real Estate Services, Worldwide.
Mid Year 2010 Market Report
NAI Isaac Commercial Properties’ Mid Year review of
commercial real estate activity in the Lexington Metropolitan
Retail Vacant Space – 9.02%
area highlights activities for the first half of 2010. This report Yr End ’09 700,000 10.7%
provides an in-depth review of the commercial real estate Mid Yr ‘10 13.1%
market, evaluates the market trends and how they may 600,000 12.5%
impact future performance.
NAI Isaac compiled and analyzed data on nearly 400 Overall
commercial properties representing over 29 million square
⇓ 14.40% 300,000
feet of office, retail and industrial premises, of which,
approximately 3.8 million square feet is currently vacant. 200,000
Lexington is uniquely positioned to continue its steady growth 100,000 0% 0%
and weather the economic uncertainty facing the nation, with 0
an economy fueled by a well-educated workforce, medical Regional Neighborhood Community
service, the University of Kentucky, agribusiness and tourism. Mall Center Power
Senior Contributing Editors Office Vacancy– Suburban 17.3% | CBD 14.5%
Yr End ’09 900,000
Mid Yr ‘10 800,000
Years Experience: Over 27 years 700,000 17.9%
Specialty: Retail & Office Office 600,000 Vacant SF
Areas of Interest: Investments Overall
⇑ 37.32% 400,000
Paul Ray Smith, Jr. 16.1% 10.6%
Executive Vice President 300,000
Years Experience: Over 24 years CBD 200,000 18.5% 11.3%
Specialty: Retail & Office 100,000
Areas of Interest: Power & Community Centers Increase -
⇑ 5.55% Sub Office Sub Office CBD Office CBD Office
Bruce R. Isaac Class A Class B Class A Class B
Senior Vice President
Years Experience: Over 24 years Industrial Vacant Space – 15.15%
Specialty: Retail, Office & Industrial
Areas of Interest: Sales, Leasing & Land Dev’t Yr End ’09 700,000
Mid Yr ‘10 13.5%
Jim Kemper 19.3%
Vice President 500,000 10.2%
Years Experience: Over 19 years Overall
Specialty: Retail & Office 400,000 15.5%
Areas of Interest: Power & Community Centers ⇑ 32.83% 300,000
John P. Miller 12.1%
Broker Associate 100,000 5.8% 5.6%
Years Experience: Over 15 years
Specialty: Mixed Use and Retail 0
Areas of Interest: CBD Development Distribution Manu- High Tech Bulk
facturing R&D Warehouse
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 Buildings GLA (SF) Available (SF) Available (%)
Regional Malls 1 1,214,135 0 0%
take advantage Neighborhood 83 4,416,773 552,368 12.51%
of more flexible Community/ Power Ctr 18 6,141,443 509,797 8.30%
terms. Total 102 11,772,351 1,062,165 9.02%
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 Suburban Buildings GLA (SF) Available (SF) Available (%)
activity in the 1st Class A 42 1,801,422 290,102 16.10%
half of 2010 was
due to tenant Class B 116 3,884,840 694,317 17.87%
renewals and Total 158 5,686,062 984,419 17.31%
a sharp rise in
vacancy will keep CBD Buildings GLA (SF) Available (SF) Available (%)
the suburban Class A 4 1,229,684 222,524 18.10%
Class B 25 1,338,284 150,529 11.25%
competitive for the
balance of the year. Total 29 2,567,968 373,053 14.53%
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 Buildings GLA (SF) Available (SF) Available (%)
Distribution 60 2,654,894 513,056 19.32%
dependent upon Manufacturing 14 1,090,271 210,959 19.35%
steady job growth High Tech/R&D 21 889,782 49,668 5.58%
and an increase
in production Bulk Warehouse 15 4,452,210 602,610 13.54%
pushing demand. Total 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.
771 Corporate Drive
Lexington KY 40503
Commercial Real Estate Services, Worldwide. 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.