SOUTHEAST SNAPSHOT, FEBRUARY 2008

Lexington Retail Market

Lexington continues to be a strong retail market with a trade area that covers a large geographic area, which benefits from a diverse service oriented economy and an affluent population. Lexington serves as the retail, service, educational and medical hub for Central, Southern, and Eastern Kentucky. High barriers to entry help retailers and restaurants that are already in the market succeed.

Shopping centers have recently been constructed in the Nicholasville Road (south), Harrodsburg Road (southwest), Man O’ War Boulevard, and University of Kentucky campus areas (central). There have also been several mixed-use projects completed or nearing completion, that have ground level retail, with several floors of residential condos. These developments are located near the University of Kentucky campus and in the CBD.

The Nicholasville Road and Hamburg areas continue to be the dominant retail corridors in the market and will be for the foreseeable future due to the critical mass of retail and restaurants in those areas and lack of retail zoned land elsewhere in the market.

Nicholasville Road, with Fayette Mall (1.2 million square feet), Lexington’s only regional mall, and several big box stores, continues to be a dominant retail corridor in Lexington and a focus for new retail interested in coming to Lexington. The Hamburg area with several large retail centers, including War Admiral Place, is an important retail destination in Lexington and benefits from the I-75 traffic and residential growth in the area.

War Admiral Place in the Hamburg development along I-75 featured Lowe’s Home Improvement Warehouse, Wal-Mart Super Center and Sportsman’s Warehouse opening in 2007. This was the final retail-zoned parcel in the current Hamburg development, so the balance of the development activity there should be professional office and residential. Brannon Crossing on Nicholasville Road has the market’s first Hobby Lobby location, and Petsmart will open this year.

Bellerive Development Company, developer of Brannon Crossing, and Patrick Madden, developer of Commerce Center on Nicholasville Road as well as several other centers in Central Kentucky are two of the active developers in the market. In addition, Weingarten Realty has purchased several Kroger-anchored centers in Lexington.

Retailers new to Lexington include Sportsman’s Warehouse, Hobby Lobby, Gordmans, Off Broadway Shoes and The Guitar Center. New restaurants include The Melting Pot, Zaxby’s, PF Chang’s, Abuelo’s and Raising Cane’s.

Major leases and purchases that have recently been consummated include Sam’s Club’s purchase of 15 acres at Commerce Center on Nicholasville Road; Sportsman’s Warehouse lease of 65,200 square feet at War Admiral Place; and Gordman’s store openings at The Plaza at Fayette Mall and Sir Barton Place at Hamburg.

The overall vacancy rate for Lexington as of mid-2007 was approximately 5.5 percent, which has been consistent with the recent historic vacancy rates.

— Jim Kemper is vice president with Lexington, Kentucky-based NAI Isaac Commercial Properties, Inc.

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