City Council Agenda and Packet 2009 01 12 Joint Meeting

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Highway 42 Market, Feasibility, and Financing Study Final Report December 11, 2008 SUMMARY OF FINDINGS 1. Market conditions in downtown Louisville are strong. Research indicates that demand is highest for offiice uses. Both in terms of new construction as well as leasing activity, the downntown market has been driven by users drawn to the amenity-rich environment. This context, however, is not currently present in the Highway 42 area. Existing rents north of Highway 42 are relatively low, reflecting modest demand for office outside of downtown. Currently, strong office demand exists in downtown, with approximately 62,000 square feet of leased floor area in 2.007 as well as development that averaged 10,000 square feet per year since 2001. In addition, downtown office space currently achieves rents that are higher than retail space at around $16 per square foot with rates for prime tenants and locations nearing $18 per square foot. Conversely, office rents outside downtown are lower, with rents along South Boulder Road at $7 to $9 per square foot. Based on the research, future office dem~~nd is estimated at approximately 30,000 square feet for the study area. Office locations will be most successful and capture the greatest amount of area demand if located in t11e portion of the study area that is mixed-use and has the greatest connectivity to downtown. 2. Anticipated household growth in the trade area surrounding the station will create demand for nei,~hb~orhood-oriented retail. Current rents along the corridor are not sufficiently high to support new retail development, although conditions are expected to be suitable in approximately four to six years based on findings from the market analysis. The current residential development in the area will generate approximately 1,100 new housing units from the Takoda, North End, and Indian Peaks projects. In addition, 330 to 360 new rooftops are expectE~d to be developed within Highway 42 area. The additional rooftops, as well as other growth expected in the trade area, will directly impact the amount of supportable retail development. The market analysis indicates that growth in the area can support 70,000 to 90,000 of net new retail floor area. New development requires $20 to $24 per square foot for in-line tenants and $18 for small anchor tenants. Market rental gates in the :Highway 42 area are currently estimated at $14 per square foot. As market pressures grow, rent potentials are expected to climb and enhance project feasibi ity. 4