Thursday, April 26, 2007

Is the retail market of Lawrence overbuilt?

The retail market of Lawrence, Kansas is out of balance, with space growing much faster than demand for that space.

Growth in supply

· From 1995 into 2007, the stock of retail space grew by 3.0 percent per year.

Growth in demand

· The inflation adjusted pace of growth in demand for retail space is growing at a rate of little less than 1 percent per year.
· The number of retail firms has been effectively flat and retail employment has fallen from 2001 to 2007.


· The mismatch between the pace of growth in supply and the pace of growth in demand is large (supply is growing at a pace 3 times the pace of growth in demand), and it is long-term (lasting more than a decade).

Proposed developments

· Proposed developments will add over 800,000 square feet of retail space. This represents an increase in the already overbuilt stock of over 12 percent.

Consequences of the mismatch

· There is over 540,000 square feet of vacant retail space in Lawrence, 395,000 south of it river.
· About 364,000 square feet of this vacant space south of the river is in general merchandise, automotive, and food use, a category that developers are seeking to expand further.
· General merchandise space, which makes up about one-half of the total stock of space, has a very high vacancy rate of 13.5 percent. Even if North Lawrence is removed from the stock general merchandise space has a vacancy of 10.1 percent, which is twice the level of a healthy market.
· The surplus stock is creating blight that was contained in North Lawrence, but now it is spreading.
· The City cannot absorb more space; additional stock will only increase vacancies throughout the City.
· The City needs to protect itself from the harm of this overbuilding by slowing the pace of retail development.

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