A Bright Spot During the Pandemic: Construction, real estate sales continue despite slowdown in other sectors

By Kathie Stamps

City Center for the Webbs, Sunday July 5, 2020 in Lexington, Ky. Photo by Mark Mahan

Since brothers Dudley Webb and the late Donald Webb formed The Webb Companies in 1972, the development company has brought to fruition quite a few commercial enterprises in Lexington, including Vine Center, Perimeter Office Park, Regency Centre, Tates Creek Centre, Lexington Financial Center, Festival Market, the Mall at Lexington Green, Palomar Centre, the new 13-acre mixed use project across from Palomar called The Fountains, and of course, the $220 million City Center mixed-use complex in downtown Lexington.

Nine floors of the 12-story City Center tower are dedicated to businesses leasing space at “The Offices at City Center.” The top three floors house 13 condominiums known as “The Penthouses at City Center.” Listed with Bluegrass Sotheby’s International Realty and priced from $995,000 to $3.66 million, seven of the condos have been sold already. Homeowners have a private elevator; access to the Marriott Hotel’s housekeeping services, its health club and swimming pool; and room service from Marriott, Jeff Ruby’s Steakhouse and ItalX by Jonathan Lundy.

A grand opening was held in January for the 218-room Lexington Marriott City Center and 119-suite Marriott Residence Inn.

Home2Suites Lexington Hamburg is a new 63,000-s.f. hotel near Malone’s and Drakes in Hamburg, owned by Lexington Hotel Partners LLC and managed by Superhost Enterprise. Built by Envision Contractors out of Owensboro, construction started in October 2018 and the anticipated opening date is Nov. 1, 2020. Home2Suites has an indoor pool, fitness center, firepit and gas grills and each of the 106 suites has a fully equipped kitchen.

The coronavirus shutdown in March, while devastating to the events calendar of Central Bank Center (the new name of the Lexington Center), turned out to be a boon for the construction schedule of the $300 million expansion project: Messer Construction is expected to complete construction a full two months earlier than the projected date. The new opening date is expected to be January 2022.

The completed Central Bank Center will have 100,000 s.f. of exhibition space, 24,330 s.f. of ballroom space, and 29,000 s.f. of meeting space. Inside Rupp Arena, the project includes upgrades to the upper seating bowl of Rupp Arena, approximately 50,000 s.f. of club space, expanded concourses and new sustainability features that will target LEED certification.

Construction crews placed the final structural steel beam atop the new exhibit hall space during a topping out ceremony in early September. About 300 people work onsite daily, according to a Rupp Arena news release.

“We are honored to be leading the expansion of this Lexington landmark,” said Mark Hill, vice president of Messer Construction.

In nearby Frankfort, Buffalo Trace Distillery, a 247-year-old bourbon distillery, is in the midst of a $1.2 billion infrastructure investment. The project includes the 2019 installation of four new 22-foot tall cookers, four new 93,000-gallon fermenters, a new $50 million high speed-bottling hall and the construction of six more barrel warehouses, three of which were completed last year. Eight more fermenters are in the works, as are a new dry house, water treatment facility, an additional still house and more barrel warehouses. On March 27, Buffalo Trace began producing and packaging hand sanitizer for government, military, health care, retail and other industries, with plans to continue this production as long as necessary.

Precast concrete companies busy with construction projects

Gate Precast Co. in Winchester recognized that COVID-19 was creating an emotional and financial strain on many of its 75 employees. So in March, GPC employees were given local restaurant gift cards “to help both our employees and local businesses in Winchester,” said Steve Schweitzer, vice president of operations for the Winchester concrete plant, one of nine facilities owned by Jacksonville, Fla.-based Gate Precast Co.

“In April, we increased pay by 10% for all hourly employees in appreciation for them showing up during one of the more stressful months. In May, we had weekly giveaways and breakfast at our weekly safety meeting,” he said.

Gate Precast entered 2020 with a good backlog of projects, “so when the pandemic hit in March we continued to produce and ship architectural precast panels from our facility in Winchester,” Schweitzer said. “It was beneficial to have facilities across the Southeast that could share information and safety procedures about how different regions were handling COVID-19.”

GPC supplied 15,000 s.f. of brick inlaid precast panels for UK’s garage on South Limestone, the parking structure known as PS5 that’s currently under construction. Other recent projects have included 8,000 s.f. of granite inlaid precast panels at Jeff Ruby’s Steakhouse in City Center and 50,000 s.f. of red acid-washed insulated precast panels at the Capital Plaza office building in Frankfort, as well as the new colonnade at Churchill Downs and Moxy Hotel in Louisville.

Lexington-based Bristol Group, a design, engineering and construction contractor – and manufacturer of precast concrete structures – is seeing “a strong demand for insulated precast wall panels (in excess of 2 million s.f.) for on-line distribution facilities into Q1 of 2021,” said President Todd Ball.

Some of the company’s recent key projects within the manufacturing sector have included CMWA in Paris, Hyster-Yale in Berea and Link-Belt CE in Lexington. Founded in 1997, Bristol Group has produced over 1 million s.f. of precast concrete products for industrial warehouses in Kentucky, Indiana and Ohio.

Commercial real estate market undergoing ‘transformation’

The Commercial Property Association of Lexington (CPAL), founded in 1977, is a nonprofit organization serving commercial real estate owners, developers and those with related expertise. The association has almost 250 members who collaborate and share information at monthly meetings, which moved to an online platform in the spring.

“Certain aspects of the commercial real estate market, such as office and retail properties, have been significantly impacted and are undergoing a transformation,” said Jake Michul, president of CPAL and a partner at the law firm of Dentons Bingham Greenebaum. “As a group, CPAL has been discussing the impact of the pandemic and government responses on real estate and the economy, both locally and nationally, and has heard from a variety of business leaders at recent meetings.”

Michul also noted that CPAL has an established history of contributing to local charitable causes, “including recent donations to COVID-19 relief efforts through God’s Pantry and Blue Grass Community Foundations,” he said.

Lexington’s industrial, office and retail vacancies have remained steady through the second quarter of this year, said Al Isaac, president of NAI Isaac, a Lexington-based commercial real estate company that manages 3.2 million s.f. of commercial property.

“Most sectors continue to adjust to the economic impact of the global COVID-19 pandemic, with the retail market being the most affected,” Isaac said.

He foresees Lexington’s industrial vacancy rate remaining at a low 3.6% “as industrial properties have been the least impacted by COVID-19 pandemic,” he said, noting that moving overseas manufacturing plants back to the U.S. is “being strongly considered by many companies as a way to strengthen supply lines” and that with the “current significant increase in online purchasing, industrial is likely to see increased demand for the foreseeable future.”

Record real estate sales continue despite low inventory

On the home front, real estate sales hit a record high in July 2020, up 13% from the previous month and up 13% year over year, according to the Lexington-Bluegrass Association of Realtors (LBAR). New construction in July was up 53% from June of 2019. Since July 2019, new construction sales have increased year-over-year in each month except one, February 2020, LBAR said.

Inventory, however, is seeing the opposite. There is far more demand than supply in Central Kentucky. July 2020’s inventory was 47% lower than July 2019. Typically, a balanced market has a six-month supply of inventory; LBAR’s 26-county region was 1.3 months in July. Fayette County has two weeks’ of homes for sale in the $100,000 to $250,000 price range.

“More homes are going under contract each month than are coming available,” said LBAR President Greg Buchanan. “The relationship between supply and demand is causing our months of inventory to drop to historic levels and prices to rise. Central Kentucky is obviously a place where people want to be so we need inventory to accommodate consumer needs.”

Agents have adjusted their sales protocol as the pandemic has progressed, incorporating social distancing measures, limiting in-person activities as much as possible, utilizing digital platforms to send documents to clients and using digital signatures for contracts. Agents are conducting video meetings and offering digital presentations to clients. Some agents and brokerages are investing in 3D imaging and virtual reality “where buyers can walk through a house and see all the details without physically touring the home,” Buchanan said.

“Real estate was deemed essential at the on-start of the pandemic and has been a bright spot for the economy throughout the crisis,” said Greg Buchanan, president of LBAR. “In Central Kentucky and throughout the region, demand for housing has continued to grow and interest rates have been, and should remain, low. These two factors will keep the real estate market strong in 2020 and into the foreseeable future. We don’t anticipate a slowdown anytime soon as this area continues to attract more and more people who want to make the Bluegrass region their home.”

Year-to-date, home sales have bounced back after seeing declines at the start of the pandemic. With the increase in July, sales through 2020 jumped to the black with 8,223 sales compared to 8,055 in July 2019, LBAR said.

The MET opening this fall

Scheduled for an October opening, Community Ventures’ $22 million mixed-use project, The MET, has added 67,000 s.f. of new construction to an existing 8,000 s.f.-building on Midland at East Third (thus the acronym MET). Of the total 75,000 s.f., 30,000 s.f. is for commercial space, about half of which has already been leased to DV8 Kitchen for a restaurant and a bakery, Art Inc. Kentucky for a retail art gallery and 24 individual artist studios, and Carolyn’s Crown and Glory for owner Carolyn Dunn’s salon. Other retail tenants are in the process of retrofitting their spaces.

The three-story facility, which greets drivers as they come into Lexington from Winchester Road, has 44 residential units and 130 parking places. The MET connects to the Legacy Trail at the Isaac Murphy Memorial Art Garden across the street, and continues all the way to the Kentucky Horse Park. Finance partners with Community Ventures on The MET include the City of Lexington, Limestone Bank, Republic Bank, Traditional Bank, U.S. Bank and Whitaker Bank, along with Community Hospitality Healthcare Services, NeighborWorks America and NeighborWorks Capital.