The second-quarter retail report from Cushman & Wakefield/Commercial Kentucky paints a rosy picture of Louisville’s retail market. Vacancy rates in the quarter, 8.9 percent, were the lowest in the last seven years, down from a high of nearly 11 percent in 2012, the year the city was struggling with the after-effects of the Great Recession.
Craig Collins, the firm’s senior director of retail and investment services, says vacancy rates are low and rents are creeping up because “there has been little to no new retail construction.”
Otherwise, he notes, Louisville’s malls, strip centers, power centers and lifestyle centers have all seen the same rate of storefronts going dark as the rest of the country’s major urban markets. Most big chain retailers are finding they simply don’t need as many stores as they used to have.
However, Collins points out, Louisville’s better centers have been able to backfill empty storefronts with new tenants. Also, he says, the region’s power centers, like Springhurst and Dixie Manor, continue to be well-occupied. This past spring, Springhurst welcomed the national home goods retailer Soft Surroundings.
“The retrenching of physical retail has affected the malls more than anything else,” Collins says. “Well-located strip retail will continue to be backfilled because it’s closest to the customer, on high-traffic roadways, in high-density residential neighborhoods with middle class if not upper-middle class demographics, and of reasonable size – large enough to create a retail synergy. Tenants like to be where other like tenants exist. They depend on people going to a center and shopping at several stores. That’s one reason Springhurst is so successful. You can find almost all your retail brands there.”
Here are pending and possible projects
• Currently, the only large speculative development is SouthPointe Commons, a 363,000-square-foot lifestyle center in Southern Jefferson County. As of yet, SouthPointe Commons has not announced its anchors, though architectural renderings of the facades and site plans are being used to attract anchor and tenants.
• Two large retail developers acquired land by the 6,000-acre RiverRidge Commerce Center in Southern Indiana. This land is likely to become large retail centers to service the development and expansion of RiverRidge. Neither developer has announced signed leases. As RiverRidge continues to develop into a large employment center, these sites would be logical for new retail development.
• At the very end of 2016, Norton Healthcare purchased a retail center in the Dupont area. Norton plans to demolish and build more medical office buildings on this retail site near its existing Suburban Hospital campus.
• The Sears and Macy’s buildings at Jefferson Mall were sold directly to the mall owner, CBL & Associates Properties, in January of 2017 for $90 a square foot. CBL plans to redevelop the buildings once Sears closes and moves out.
• Floor & Décor, the Atlanta-based flooring products contractor that has stores in Cincinnati, Nashville, Columbus and Knoxville – but not previously in Louisville – has taken the old JCPenney site on Preston Highway.
• The new, just-announced Menard’s will be going to Cooper Chapel Road and the Gene Snyder. The Wisconsin-based tools and building retailer has nearly 300 stores nationwide, including ones in Owensboro and Jeffersonville, Ind. This will be its first Louisville location.
What about rents and sales?
“Rental rates in the metro area have remained stable, with the highest rents in the market still at $30 per square foot,” the report says. “The average rent for inline grocery-anchored centers continued to be $18-$24 per square foot, and service retail small space continued to command $10-$12 psf during the first half of 2017.”
The vacant Kmart building on Poplar Level Road has been seeking $8 a square foot for the space.
“Rents for second- and third-generation large-box space continue to stay in the high single digits, in an attempt to attract large-box users to backfill these large retail buildings.”
As for property sales, the report says that the sales activity for retail properties in the Louisville Metro area has slowed down in the first half of 2017. The Shoppes at Forest Green, a 47,000-square-foot retail strip center off Hurstbourne Parkway, sold for $144 per square foot in April 2017, the report said. Another small retail center, a 15,000-square-foot property located off Brownsboro Road in northeastern Jefferson County, sold for $193 – the highest price per square foot for retail property so far in 2017.
The former Kmart building in New Albany was acquired by a local construction company with plans for speculative retail development and backfill for this 90,000-square-foot property.
As for the now-vacant Kmart store on Taylorsville and Breckenridge roads in Hikes Point – a big box with huge parking facilities – Collins says he expects activity quickly, with some speculator redeveloping it “at a higher function than the current Kmart building, aimed at the local Hikes Point residents,” whether that means single tenant or several. “It can’t go vacant for very long,” he insists, “it’s a killer location.”