Louisville’s evolving retail market has presented a mix of new development and infill redevelopment opportunities that have created a substantial amount of activity in targeted areas.
While rents and absorption activity have fluctuated, several of these new developments have proven that well-designed, experiential retail projects can still gain traction and create the buzz necessary for successful brick-and-mortar retail.
No project in Louisville encapsulates this more than the Whiskey Row project that is taking place downtown in the central business district (CBD). It has been several years since retail development or retailers have ventured downtown, but this new project has created the level of excitement that has attracted national retailers.
Robert Schwartz, CBRE
The driving force behind Whiskey Row is the tourism industry centered around Louisville’s well-known bourbon scene. The $30 million mixed-use project will be a redevelopment of former distilleries, with the developer preserving and restoring the historic facades, while building out world-class retail, restaurant and office space in the existing structures. The entire project will consist of 24,000 square feet of retail.
With new distilleries and restaurants opening around the mixed-use development, retailers have been drawn by the foot traffic that will undoubtedly be delivered by tourists traveling to Louisville for the bourbon and whiskey tastings in these new developments. As a result, the largest retail lease in the CBD in recent memory was just completed at Whiskey Row, with Duluth Trading Co. taking 15,000 square feet. This is a substantial deal for the heart of Louisville, proving that retail can thrive in an experiential setting, where consumers can partake in many different activities — in this case dining and distillery tours.
Development Outside CBD
As new development has taken place in the CBD, targeted areas in the greater metro area have shown promise for ground-up development, most noticeably east and south of the CBD in the Middletown and Outer Loop areas and outside the Interstate 265 corridor, which nearly encircles the city. The main drivers of this activity have been value retailers, grocery stores and restaurants.
Recent development in the south and east were driven by Academy Sports + Outdoors’ entry into the market. Middletown Commons, opened in 2015, is a 226,000-square-foot power center anchored by Academy Sports, Hobby Lobby and Ross Dress for Less. Jefferson Commons, a 200,000-square-foot power center anchored by Academy Sports, Liquor Barn and Michaels, opened on Outer Loop in 2015. Several months after its opening, the development was sold for $36 million.
This activity gave developers confidence in the expanding Interstate 265 corridor, and now, several other projects have launched.
SouthPointe Commons, a 363,000-square-foot power center, broke ground in Fern Creek in March. Located in the southeast portion of the metro area and along I-265, the $80 million project will include a grocery store, home improvement store, a movie theater and several restaurants.
New development in this area is coming from individual retailers as well. Menards recently purchased 34 acres for its first Louisville store, and the second store in the metro area in just two years. Set to deliver in 2019, the store is planned to be 203,000 square feet with a 54,000-square-foot storage building.
The Old Henry Road Area has demonstrated a lot of promise with office and residential development, which are driving new retail there as well. Recently, Jefferson Development Group purchased more than 100 acres for a massive mixed-use development that will include multifamily, office, senior living, a high-end auto dealership, health club and other retail.
These projects demonstrate that the south and east sides of Louisville, particularly around I-265, are ripe for development and demand has given retailers and developers optimism to move shovels and commit to new projects.
The success of these developments, as well as future residential development in this area, will determine how much more product can be added. The main driver of new development has traditionally been grocery.
Louisville is seeing redevelopment of vacant big box spaces with discount retailers, non-traditional retailers — such as trampoline parks and fitness centers — and service-driven retailers like restaurants and movie theaters. Louisville doesn’t have an overabundance of vacant box spaces compared to other cities and landlords are having success in backfilling these spaces.
We also expect to see more opportunities downtown as projects like Whiskey Row open and retailers see the type of demand that innovative projects like this can create.
— By Robert Schwartz, Senior Vice President, CBRE. This article originally appeared in the September 2017 issue of Southeast Real Estate Business.