Urban Trends
Studies provide a look at how the downtown business districts in Louisville and Lexington are faring as suburban growth continues

Recent analyses of commercial real estate trends in Kentucky's two largest urban markets indicate that while downtown office vacancy rates continue to run higher than the respective suburban rates, downtown markets in both Lexington and Louisville have displayed a steady decline in vacancies over the past several years.

LOUISVILLE

Based on figures compiled by Commercial Kentucky, Inc. for the third quarter of 1998 (the most recent available), the overall vacancy rate in Louisville's central business district dropped slightly to the current rate of 16.5 percent. (The city's suburban vacancy rates have increased since the previous quarter by approximately one percentage point to 12.4 percent, an increase primarily attributed to the trend in corporate downsizing as well as some businesses moving out of the Louisville market entirely.) That figure stands to improve even more in the coming months as Louisville-based Vencor, Inc., a long-term healthcare provider, consolidates its Louisville offices by moving to One Commonwealth Place in downtown Louisville, formerly the home of Providian/Aegon. (The company currently employs approximately 800 people at its corporate offices, which are now spread among the Aegon Tower, 444 S. Fifth Street, National City Tower and in the ARM Financial building on Market Street.) The report also notes that the failed merger between Louisville-based Humana, Inc. and United Healthcare bodes well for Louisville since it means that Humana will remain in Louisville rather than moving out of state.

In addition, Brown-Foreman has purchased the old St. Charles Hotel and the Bernheim Building in downtown Louisville with plans to renovate the historic structures. The company will relocate approximately 200 employees from its overcrowded headquarters on Dixie Highway. The move is expected to further strengthen Louisville's efforts to improve the West Main Street area, which is now home to The Louisville Slugger Museum, the Louisville Science Center and numerous new businesses and restaurants.

Louisville's central business district includes a total of 9,330,288 square feet of space, of which 3,502,342 is considered Class A space. Leasing rates range from $7.00 to $19.50 per square foot, with Class A space falling into the $16.00 - $19.50 category.

LEXINGTON

A study conducted by LaSalle Partners Management Services, Inc. shows Lexington's central business district vacancy rate for the third quarter of '98 to be 10.78 percent. That figure is nearly a mirror image of the national downtown vacancy rate of 10.8 percent as reported by Cushman & Wakefield, an international real estate services provider. (Lexington's three percent suburban vacancy rate, however, is in sharp contrast to suburban rates in Louisville and the national suburban vacancy rate of 10.9 percent.) As of the third quarter, approximately 237, 421 square feet of the central business district's 2.2 million gross leasable square feet (1.9 million of which is considered Class A space) were vacant. However, the report notes, another 100,000 square feet is projected to become vacant in the coming months based on the following data:

• Long John Silvers, which currently occupies around 103,000 square feet in the Kincaid Towers, plans to downsize by 45 percent, leaving more than 46,000 in the building vacant.

• IBM, which has maintained 30,000-square-feet of office space in the Lexington Financial Center, has moved its offices to new office space near Lexmark headquarters.

• As a result of the merger between Kentucky Utilities and Louisville Gas & Electric, Kentucky Utilities will reduce its downtown office space by 26,000 square feet.

• The departure of Anthem Blue Cross & Blue Shield from the Lexington market leaves 45,000 square feet of space in the World Trade Center (formerly known as Vine Center) available for sub-lease. (Anthem's lease was signed through the year 2004.)

Current rental rates for Lexington are averaging $15.00 - $18.00 per square foot for both the downtown and suburban markets.

Karen Baird is associate editor of The Lane Report.

Back to Real Estate & Development Index

Back to January Issue

Copyright 1996-98, by Kentucky Business Online, LLC.  All rights reserved.

Editorial content is copyright 1998, Lane Communications Group
All editorial materials is fully protected and must not be reproduced in any manner without prior permission. 

Buzzword and the Buzzword balloon are registered trademarks of Buzzword, Inc.  The Lane Report is a trademark of Lane Communications Group.  All other trademarks are the property of their respective owners.