Lexington Sustainable Growth Study: Existing Conditions and Growth Trends Report

EXISTING

Existing Conditions and Growth Trends Report

Lexington Sustainable Growth Study

November 17, 2021

Prepared for:

The LFUCG Sustainable Growth Task Force

Prepared by:

Stantec Consulting Services Inc.

EHI Consultants

MXD Development Strategists

Urban3

Introduction

Executive Summary

During the development of the current Imagine Lexington Comprehensive Plan adopted in early 2019, the question of expanding the USB was much discussed, resulting in a fundamental debate over what criteria and indicators, if any, would be sufficient to demonstrate the need for expansion. The Lexington Sustainable Growth Study was born from that discussion and debate, codified in Theme E, Goal 4 of the plan:

“Protect Lexington’s invaluable rural resources and inform long-range planning for infrastructure, community facilities and economic development through the creation of a new process for determining long-term land use decisions involving the Urban Service Boundary and Rural Activity Centers.

A. Establish the process via a study, involving diverse stakeholders and constituents, that meets the projected needs of the agricultural and development communities, by preserving key agricultural resources from development pressures and identifying land for future urban development.

B. Ensure the study designates rural land for long-term preservation, identifies land for potential future urban development and specifies triggers, thresholds and timing for the addition of the identified urban land into the Urban Service Boundary, keeping infill and land use efficiency as the continued primary objectives.”

To address the first part of that process, the Existing Conditions and Growth Trends Report identifies the foundational data for evaluating a set of growth scenarios designed to establish a plan for the type of development necessary to allow the USB to accommodate growth for as long as possible. This report evaluates demographics, employment, land use, housing, commercial (office, retail, and industrial) development, LFUCG finances, infrastructure, and community facilities as they relate to development patterns and decision making about the USB. The report also presents growth trends for populations and commercial growth to understand the demand for development within the USB.

The growth in and around Lexington have been consistent for many decades and in recent years increasingly interconnected, particularly within the housing and employment markets. Figure E.1 illustrates how many people commute into the USB for work, whether due to Lexington’s large job market or to take advantage of the new housing that is rapidly developing outside Fayette County.

Introduction

Understanding vacant and underutilized land within the USB along with projected demand and financial impacts are one set of key elements for making decisions about expansion. The amount of vacant land within the USB is approximately 5,117 acres all of which has an assigned zoning classification. Table E.1 and Figure E.2 illustrate the current status of vacant land within the USB. In Transition Acreage includes areas where development proposals are currently in process with LFUCG, recently approved, or under construction.

Figure E.1 USB Commuter Inflow and Outflow

Table E.1 Summary of Vacant Land and Land in Transition by Land Use Description

Introduction

Growth trends for population, industrial development, office development, and retail development were developed to project demand for land through 2040. Conservative and Full growth trends were projected for each of these primary land use categories based on the most recent ten year (conservative) and 20 year (full) periods. The benefit of this approach is that it reflects both medium-term and recent events in these sectors and provides a transparent and easily replicable method for revising the respective trend lines with future data as it becomes available for future analyses. Population projections from the Kentucky State Data Center and recent population trends estimated from the United State Census American Community Survey were used to project the total number of households within Fayette County in 2040 Ten and 20-year trends for the development of new commercial (retail, office, and industrial) inventory, were extrapolated to project the total square footage of new space needed by 2040 in these categories.

Figure E.2 Vacant land by Land Use

Introduction

Conservative and Full trendlines project 20-year population in Fayette County to grow between 29,750 and 41,200 households by 2040 respectively. The conservative trendline is based on the past ten years of population estimates from the American Community Survey (2010 – 2019), while the full trendline reflects the projected forecast of the Kentucky State Data Center based on population estimates from the 2010 Census and the 2015 American Community Survey The household estimate for Fayette County from the 2020 Census will be released later this year. Figure E.3 shows the Conservative and Full growth household projections through 2040.

20 Year Household Growth Trendlines

Conservative Full

Figure E.3

20 Year Household Growth Trendlines

Conservative and Full trendlines project 20-year demand between 1.3 million square feet and 5.6 million square feet of new industrial space in Fayette County This translates to between 65,000 square feet to 278,000 square feet on an annual basis. The wide range between trendlines reflects a significant building boom in the period before the recession beginning in 2008, followed by a much lower rate of industrial development after the recession. The impending development of a new LFUCG initiated industrial park on the site of the old University of Kentucky Dairy Research Farm will not only provide new capacity, but also offer an indication of current demand for new capacity in this category, affecting these trendlines going forward. Figure E.4 shows the growth projections for industrial square footage through 2040.

Introduction

20 Year Industrial Growth Trendline (Cumulative SF)

Conservative and Full trendlines of medium-term and recent office development project 20-year demand between 2.5 million square feet and 4.6 million square feet of new office space in Fayette County. This translates to between 123,000 square feet to 231,000 square feet on an annual basis. The Lexington office market has demonstrated itself to be a stable market, with less speculative development occurring than in the larger office markets in Louisville and Northern Kentucky, resulting in comparatively low vacancy rates. The lasting effects of the current shift to remote office work due to the COVID pandemic, whether large or small, will be reflected in the development of new space in the near future. This near-term development will in turn affect the future trends for office demand going forward. Figure E.5 shows the growth projections for office square footage through 2040.

Figure E 4

20 Year Industrial Growth Trendline for Fayette County (Cumulative SF)

20 Year Office Growth Trendline (Cumulative SF)

Conservative Full

Conservative and Full trendlines project 20-year demand between 2.2 million square feet and 5.0 million square feet of new retail space in Fayette County. This translates to between 110,000 square feet to 250,000 square feet on an annual basis. Traditionally, the development of new retail space is highly correlated to the patterns of new residential development. The effects of the recent rise of online retail competition will also continue to impact the future development trends for this sector. Figure E.6 shows the growth projections for retail square footage through 2040.

20 Year Retail Growth Trendline (Cumulative SF)

Conservative Moderate

Figure E.5

20 Year Office Growth Trendline for Fayette County (Cumulative SF)

Figure E.6 20 Year Retail Growth Trendline for Fayette County (Cumulative SF)

Introduction

Impact to LFUCG finances should be an important consideration in deciding if, when, where and how the USB will be expanded. Knowing how different types of development patterns translate to revenue and expenditures should be considered alongside how they meet demand and how they meet LFUCG goals such as the provision of affordable housing, accessibility, or preservation of green space. LFUCG’s revenues are significantly weighted towards the collection of occupational license fees, which represent a payroll tax on work performed inside the county. As a result, offices with many workers per square foot of space produce the most revenue per acre for LFUCG of any land use Conversely, single family residential and agricultural uses, from which LFUCG primarily collects property taxes, generate the least amount of direct revenue However, these land uses directly support the land uses where higher revenues are generated. Figure E.7 illustrates the revenue generated by the various land use types.

Figure E 7 LFUCG Revenue by Land Use Type

Introduction

Understanding the relationship between revenue and cost of services should help make decisions about what types of development should occur when the USB is expanded. Figure E.8 illustrates where in Fayette County generates revenues that exceed the average per acre government expenditures and by how much. Areas in green illustrate the essential sources of land use-based revenue generation for LFUCG. That is not to imply that all development patterns should generate high revenues for the city, however there must be an appropriate balance of the revenue base for city finances to be sustainable.

Other Revenue, 144,775,000

Property Tax, 25,975,000

Business License

Fees, $208,250,000

Roads, $71,937,989

Pipes, $69,800,990

General Government, $379,000,000

Revenue

Expenses

Figure E.8 Revenue Related to Average Per Acre Cost

Introduction

1.0 INTRODUCTION

Land use planning in Lexington and Fayette County is inextricably linked with the nation’s first adopted Urban Service Boundary (USB), which creates Lexington’s uniquely distinctive balance of urban and rural landscapes and economies. The USB designates more than 85 square miles of Fayette County for urban uses, with the remaining 200 square miles of the county reserved for agriculture and other natural and rural land uses. The USB was last amended in 1996, adding 5,329 acres within three new expansion areas governed by an Expansion Area Master Plan. Since 1996, the metropolitan area of Lexington has continued to grow and expand, both within the USB and in the counties that surround it, which are increasingly interconnected with it. During the development of the current Imagine Lexington Comprehensive Plan adopted in early 2019, the question of again expanding the USB was much discussed, resulting in a fundamental debate over what criteria and indicators demonstrated the need for expansion. This Sustainable Growth Study was born from that discussion and debate, codified in Theme E, Goal 4 of the plan:

“Protect Lexington’s invaluable rural resources and inform long-range planning for infrastructure, community facilities and economic development through the creation of a new process for determining long-term land use decisions involving the Urban Service Boundary and Rural Activity Centers.

C. Establish the process via a study, involving diverse stakeholders and constituents, that meets the projected needs of the agricultural and development communities, by preserving key agricultural resources from development pressures and identifying land for future urban development.

D. Ensure the study designates rural land for long-term preservation, identifies land for potential future urban development and specifies triggers, thresholds and timing for the addition of the identified urban land into the Urban Service Boundary, keeping infill and land use efficiency as the continued primary objectives.”

The primary purpose of the Lexington Sustainable Growth Study is to establish an objective datadriven framework for evaluating the growth trends and projections that will determine whether Lexington has the land resources available to meet the needs of a continually growing community and economy. This Existing Conditions and Growth Trends report identifies and analyzes the datapoints that are necessary to include in that evaluation framework. These data points cover demographics and economic activity, housing and commercial inventory, fiscal and infrastructure considerations, and most importantly, the analytics of the land available to accommodate the future growth of the community.

This document informs the other primary task of the study, the development of the evaluation framework, which will be tested and refined in this study via the evaluation of three potential

Demographic Profile

development scenarios. The existing conditions presented in this report, along with the growth trends identified will be the starting point for these development scenarios.

An important aspect of this study and the development of the evaluation framework is the ability to regularly repeat evaluation scenarios. Data sources must be readily available and consistently updated to reflect current conditions and to establish consistent analyses. In addition to census data and other primary sources for understanding and developing trends, this study has relied on LFUCG’s parcel-level GIS databases covering zoning and PVA information related to land development. While there are many areas covered in this report, the most critical database is this GIS database, which the study will return to LFUCG, along with detailed guidance for future use.

It should be noted that although this report covers similar ground, it is not intended to be a thorough reexamining or replacement of the comprehensive land use planning and housing analyses performed in previous studies. It attempts to identify data points and trends with a focus on the parcel level zoning and land use data essential to the study.

2.0 DEMOGRAPHIC PROFILE

2.1 POPULATION

Fayette County is Kentucky’s second most populous county behind only Jefferson County. Its population growth continues to rank among the fastest growing counties in Kentucky, particularly among large counties with populations over 100,000 people. Fayette County is the primary county within the Lexington–Fayette, KY Metropolitan Statistical Area, which comprises five of the six adjacent counties, excluding Madison County. As an adjacent county, Madison County is included in this analysis and included in a seven-county region. Table 2.1 presents a comparison of the total population growth in Fayette and its neighboring counties over the past 20 years, beginning with the 2000 Census through the latest available estimates collected by the United States Census as part of the 2019 American Community Survey (ACS). (County-level data from the 2020 Census will be available later this year.)

As illustrated in Figures 2.1 and 2.2, Fayette County comprises slightly more than half of the population of the seven-county region and represents 50 percent of the growth that has occurred in the region since 2000. Outside of Fayette County, Madison, Scott and Jessamine counties represent the largest and fastest growing counties, with the largest increment of growth occurring between 2005 and 2010. As of 2019, Fayette County makes up more than seven percent of the state population and almost 15 percent of the state’s growth since 2000. Approximately 97 percent of Fayette County’s population resides within the USB.

2.1 Fayette and Regional Population

Figure 2.1 Population Share by County

2.2 HOUSEHOLDS

The composition of households represents the fundamental building block of residential development and includes all residents living outside group quarter arrangements, such as nursing homes, school dormitories, and prisons. Household composition affects the type and quantity of the housing stock necessary to accommodate the household population, particularly regarding household size and the age of householders. Households can include single persons, non-related persons living together, and families with both related and non-related members.

Table 2.2 compares Fayette County’s households with the adjacent counties. Fayette County has a slightly lower average household size than the region and state, but its average family size is close to regional and state averages. The proportion of households in families in notably lower in Fayette County than surrounding counties, as well as the proportion of households that include minors under 18 years of age and adults over 60 years of age. This reflects Fayette County’s role as a regional metropolitan center, which tend to have a larger contingent of younger, working-aged adult households. The presence of the University of Kentucky and Transylvania University also contribute to the consistent influx of younger householders who come to Lexington for school and stay for career opportunities. Adjacent counties with a higher proportion of families and minors partially reflect their role as bedroom communities for Lexington. It is also typical to find higher proportions of households with older adults in rural areas with slower growth and fewer nonagricultural employment opportunities, which comprise much of the neighboring counties

Figure 2.2 Population Growth Since 2000

2.3 AGE PROFILE

A comparison of the age profile of Fayette County with the combined population profile of the six surrounding counties reiterates the demographic distinctions between Fayette County and its neighbors. As shown in Table 2.3 and Figure 2.3 the surrounding counties have higher proportions of minors and older adults while Fayette County has a notably higher percentage of people in their twenties and slightly higher percentage of people in their thirties. Ideally, Fayette County’s housing stock should reflect the additional demand for the type of housing units that are most compatible in size and affordability for this outsized age group.

Demographic Profile

2019 Age Cohorts by Population Share

*Bourbon, Clark, Jessamine, Madison, Scott and Woodford Counties combined

Source: United States Census; American Community Survey

Fayette County reflects the general aging trend occurring throughout the region, Kentucky, and the nation. Table 2.4 shows that except for Madison County, Fayette has the youngest median age in the region, but that median age has risen from 33 to 35 since 2000. In Table 2.5 and Figure 2.4, Census data and forecasts from the Kentucky State Data Center (KSDC) depict the movement of the cohort born between 1950 and 1970 as they age from their 30’s and 40’s in 2000 to their 70’s and 80’s by 2040. By 2040, people aged over 60 will represent more than 22 percent of Fayette County’s population, as compared to 13 percent in 2000. Recognizing an aging population indicates the need to plan for housing types that are appropriately sized, designed, and located to accommodate this growing demographic.

Source: United States Census; American Community Survey

Table 2.3 2019 Age Cohort Distribution

Table 2.4 Median Age by County

Figure 2.3 2019 Age Cohorts Comparison

Demographic Profile

Table 2.5. Fayette Age Cohorts by Year

Fayette County Age Cohorts by Year

Figure 2.4 Fayette Age Cohorts by Year

2.4 RACE AND ETHNICITY

Table 2.6 indicates that Fayette County reflects a more diverse racial and ethnic population than the rest of the region and Kentucky. Fayette County’s minority population is more than double the state average and nearly three times greater than its neighboring counties. Table 2.7 and Figure 2.5 illustrate how minority populations in Fayette County have grown within the total population since 2000, with the number of residents identifying as Hispanic or two or more races doubling in share. Given historical and existing inequities and barriers to housing experienced by minority communities, particular emphasis should be placed on ensuring that sufficient and equitable housing options are available to accommodate these growing communities.

*Bourbon, Clark, Jessamine, Madison, Scott and Woodford Counties combined

Source: United States Census; American Community Survey

Source: United States Census; American Community Survey

Table 2.6 Racial and Ethnic Population

Table 2.7 Fayette Racial and Ethnic Composition by Year

Figure 2.5 Fayette Racial and Ethnic Composition

2.5 INCOME

The connection between income and housing costs is indicative of the relative affordability of housing in the community. Of particular concern is recognizing the extent of those who are most vulnerable to housing insecurity as reflected by their income or poverty status. Table 2.8 shows that Fayette County has the highest per capita income in the region, as would be expected as the largest employment center with a high concentration of higher paying employment opportunities. Scott County and Woodford County have higher median household incomes, suggesting a higher concentration of multiple income family households in Scott County and overall higher affluence among Woodford County’s smaller household population. Poverty rates in Fayette County are within the range of the other counties and lowest for children living in poverty. Fayette County matches the state average for seniors living in poverty.

Source: United States Census; American Community Survey

Table 2.9 and Figure 2.6 compare the distribution of household income within Fayette County with the combined households of the six surrounding counties. It demonstrates a relative uniformity between Fayette County and its neighbors, indicating the connections of the counties within a shared regional economy.

As a method for categorizing households for the analysis of housing affordability, the 2017 Fayette County Housing Demand Study set 50% of the medium income and 80% of median income as the upper thresholds for low and moderate households. The income range for workforce housing was set between 80% and 120%. According to these thresholds, households in Fayette County with less than $29,200 in annual income qualify as low-income households, households with incomes up to $46,700 qualify as moderate income households, and households with incomes up to $70,000 qualify as middle income workforce housing.

Table 2.8 Income and Poverty Rates by County

Employment

Household Income

Fayette

3.0 EMPLOYMENT

3.1 EMPLOYMENT ANALYSIS

3.1.1 Fayette County Location Quotient

Fayette County’s economy was examined in terms of its concentration of various employment sectors compared to the national average, as well as the change in number of jobs in each sector over the past decade. A Location Quotient (LQ) was calculated for each employment sector compared to the U.S. average. An LQ greater than 1 demonstrates a higher concentration of that employment sector in Fayette County over the national average, while less than 1 demonstrates lower concentration.

The County’s traditionally strongest sectors include Health Care (LQ 1.33), Educational Services (LQ 1.25) and Administration & Support (LQ 1.21). These sectors grew significantly faster than the national average, further entrenching their role in the County economy. These sectors are considered “Stars” in terms of performance and significance and are likely to drive commercial, industrial, and institutional real estate development in the local area in the coming years.

Overall, Fayette County experienced a faster growth in employment than the national average over the 2008-2018 period (the latest available data). Of particular note is the rapid growth in the

Table 2.9 Distribution of Household Income

Figure 2.6 Distribution of Household Income

Employment

Transportation & Warehousing employment sector, which is associated with significant large scale industrial real estate development such as Logistics centers.

Conversely, sectors where Fayette County has not demonstrated a strong concentration of, such as Manufacturing, Finance and Wholesale Trade further lost ground to the national average. These sectors are considered “Transforming” and are likely consolidate for many years before emerging in local concentration.

Retail Trade and Agricultural-related employment are well-represented in Fayette County but have lost ground vis-à-vis other employment sectors in the local area. These are considered “Mature” employment sectors unlikely to generate significant new employment and related real estate development over the forecast horizon.

Only a single sector, Other Services, considered as an “Emerging” employment sector in Fayette County. Emerging employment sectors have lower representation locally than the national average but are growing relatively quickly and likely to generate significant real estate development in coming years.

Table 3.1 Fayette County – Employment Sector Location Quotient (LQ) Analysis

Employment

An Economic Base Analysis identifies those sectors that are export-oriented (to regional, domestic and/or international markets) and therefore importing earned capital into the local economy Fayette County reports a low proportion of export-oriented jobs at 10.9%, led by Health Care, Education and Administration & Support employment sectors.

Employment sectors such as Transportation & Warehousing, as well as Professional, Scientific & Technical Services demonstrate very low levels of export-orientation. These sectors have generated

Figure 3.1 Fayette County – Employment Sector Location Quotient (LQ) Analysis

Employment

a major share of the nation’s employment growth in recent years and could potentially represent opportunities for the Lexington economy.

A Shift-share Analysis identifies employment sectors which Fayette County demonstrates important comparative advantages over the rest of the national economy. These advantaged sectors will be key demand drivers for new real estate development over the next decade or more. Fayette County demonstrates a strong comparative advantage in the same sectors which it has an export orientation: Health Care, Education and Administration & Support.

The County appears to be at a comparative disadvantage to other regions in terms of Professional, Scientific & Technical Services, Manufacturing, and Information (ie Media) sectors.

Table 3.2 Fayette County – Economic Base & Shift-Share Analysis: 2008 - 2018

Employment

3.1.2 Lexington Region (excluding Fayette County)

The six counties surrounding Fayette County experienced modest employment growth from 20082018. Overall employment grew by 7.9% during this period, compared to 12.3% nationally and 17.2% in Fayette County.

This area has benefitted from a relative concentration in Manufacturing employment historically (LQ 1.6), and despite losing nearly 1,000 jobs in this sector, it has performed better than the national average.

The outlying counties have a strong representation of “back office” type employment sectors including “Administration & Support” and “Management of Companies”. These sectors have grown in significance in recent years and are considered “Stars” in terms of future office real estate development potential. Emerging sectors relate to Professional, Health Care and Government, as well as growth in Accommodation/Food & Beverage employment. Retail Trade employment has been above the national average in the suburban counties but has declined in relative concentration, much as it has nationally.

Source: U.S. Census

Table 3.3 Surrounding Region Employment Sector Location Quotient (LQ) Analysis

Employment

Several sectors in these counties are considered “Transforming” in that they are neither highly concentrated in the local economy or growing. These include a wide range of sectors.

13.2% of jobs in the surrounding region counties are classified as export-oriented, with Manufacturing demonstrating a high LQ and high proportion of export jobs.

Shift-share analysis indicates that the surrounding counties have a significant comparative advantage in Manufacturing and Administration & Support. However, it does lack strength in the Education Services sector, Arts, Entertainment and Recreation, and Public Administration.

Figure 3.2 Surrounding Region Employment Sector Location Quotient (LQ) Analysis

Employment

Overall the surrounding region appears to be a slow-growing employment area generally dependent on its established Manufacturing enterprises for a significant portion of its employment market and is not well engaged with rising employment sectors such as Professional, Scientific & Technical Services.

Source: U.S. Census

In summary, Metro Lexington’s employment has increasingly concentrated in Fayette County in recent years. Employment growth in the surrounding counties has been modest and largely concentrated in manufacturing and “back office support” type activity. No industrial-related employment sectors have demonstrated strong new employment growth outside of Fayette County.

Table 3.4 Surrounding Region Economic Base & Shift-Share Analysis: 2008 - 2018

Employment

3.2 COMMUTER PATTERNS

Using U.S. Census data and its on-line tool, OnTheMap, users can upload spatial geography and aggregate Longitudinal Employer-Household Dynamics (LEHD) Origin-Destination Employment data. These tools provide information on the worker age, earnings, jobs in industry NAICS sector, race, ethnicity, education attainment and worker sex. Using the USB as the analysis area, several statistics relating to local and regional commuting patterns were developed. The area profile report indicates that in 2018, 131,595 people living in the USB commuted to a primary job, which could be located anywhere. Further, 141,414 people commuted to a job located inside the USB. and are classified as having a private primary job. Table 3.5 identifies the distance these workers commute for their jobs, indicating that a higher share of commuters to work traveled longer distances than residents within USB.

All Primary Jobs

Source: US Census, OntheMap

The OnTheMap tool also analyzes the distance and direction of jobs. This permits us to identify and visualize the magnitude of employment by direction workers’ travel. Figure 3.3 illustrates the information in radar charts for workers commuting from within the USB to work and workers commuting to work within the USB While the LEHD data does not distinguish the mode of commuter travel, it is presumed that inter-county travel is overwhelmingly via private occupancy vehicles. The highest proportion of residents traveling outside the USB tend to have destinations toward the west to the north, while commuters traveling into the USB travel from further distance and have a higher concentration of travel from west, south, and east. Figure 3.4 presents a heat map of the home location of commuters working inside the USB, illustrating both the concentration of resident workers inside the USB as well as the distribution of long-distance commuters throughout the region.

Table 3.5 Primary Job Commutes within the Urban Service Boundary

Employment

Source: US Census, OntheMap

Source: US Census, OntheMap

Figure 3.3 Distance and Direction of Commuter Travel to and from the USB, 2018

Figure 3.4 Origin of Commuters with Jobs Inside the USB

Employment

Another OnTheMap tool is the inflow outflow analysis. This analysis compares the number of workers who live and work inside the USB with those who commute into and out of theUSB. Table 3.6 presents the commute totals between 2002 and 2018 and indicated that while the share of workers living outside and commuting to the USB has significantly increased since 2002 and now outnumber residents of the USB working inside the USB. Twice as many workers commute to the USB as commute from the USB. Figure 3.5 presents the visualizations of the inflow and outflow pattern for 2018.

All Primary Jobs

Source: US Census, OntheMap

Table 3.6

USB Commuter Inflow and Outflow

Figure 3.5

USB Commuter Inflow and Outflow

4.0 LAND USE ANALYSIS

4.1 EXISTING LAND

The USB totals approximately 85.3 square miles or 54,630 acres divided into primary octants by Leestown-Richmond Road-Athens Boonsboro Rd northwest to southeast, Harrodsburg-Broadway southwest to northeast, Versailles-Winchester west to east, Nicholasville Road-Newtown Pike south to north. According to the information provided LFUCG, there are 36 zoning classes, eleven of which are for residential uses, eight business zoning classes and the balance a mixture of expansion area residential, commercial, office, industrial and agricultural and farmland.

4.1.1 Zoning by Class

Figure 4.1 illustrates the distribution of zoning throughout the USB and Table 4.1 summarizes the count of parcels and acreage within each class and a value for the reported number of living units for zones with multiple dwelling units per parcel. Residentially zoned property dominates the USB. Residential property constitutes 89% of all parcels and 59% of land area. If the values recorded in the “LivUnits” field of the PVA data are reliable, the developed density of R-3 zoning equates to 3.2 dwellings per acre, 7.1 dwellings per acre in R-4 and 12.0 dwellings per acre in R-5. In addition to the Planned Unit Development and residential zones, LivUnits were tallied in the Downtown Business, Frame Business, Lexington Business Center, all three Expansion Areas, Mixed Use, and the Professional Office zones for a total of 37,255 units in these zones. A great deal of multi-family zoning is located near the University of Kentucky campus and on the north side of the downtown business district. However, pockets of multi-family development are often located adjacent to the R-3 zoning classes with higher densities near Richmond Road and along Man O War Boulevard Industrial uses are concentrated in the northwest quadrant served by numerous rail lines in the area north of Versailles Road east and north of downtown. Additional industrial uses are located near Winchester Road and along Palumbo Drive, both areas also served by rail. A smaller concentration of industrial land is located on both sides of northwest New Circle Road and east of Nicholasville Road. Commercial and office zoned parcels proliferate along the major corridors with a high concentration along New Circle Road. Farm and agricultural lands are chiefly found along the edges of the USB, most of which are contained within an Expansion Area boundary.

Land Use Analysis

Figure 4.1 Existing Zoning

Count, Acreage and LivUnits by Zoning Class within the USB, 2020

Land Use Analysis

In order to understand the future potential on vacant parcels within the non-residential zoning classes, an analysis was conducted on the developed landform using the PVA data and attributes for zoning, year built, and reported commercial building square footages. All records that had incomplete data were omitted. The objective was to identify an existing building to land area ratio by zone to ascertain potential square footage for the business, commercial, industrial and office use categories for the build-out scenarios. In all cases, if there was a sufficient sample size of post 2000 and/or 2010 development to use as a guide, that ratio was used to forecast future square footage values. Table 4.2 summarizes the results of this analysis. Instances of n/a reflect an absence of more recent data.

Table 4.2 Analysis of the Built Environment of Non-Residential Zoning Classes

Source: PVA Data; Stantec

Figure 4.2 categorizes the 35 zoning classes into major categories and provides a total acreage within each zone. This graphic illustrates the significance of the residential zoning use compared to the employment generating use acreages (41%). The 59% residential zoning ratio doesn’t include the acreage currently designated as Farmland or Agricultural. Many of the acreages in these categories have been identified for future residential uses.

Figure 4.3 depicts the eleven residential zoning classes, which are dominated by the R-1C and R-3 uses. When aggregated, these two zones represent 53% of all residential classes. Since R-3 permits

Land Use Analysis

higher densities and there are currently very few acres in the R-5 zone, vacant R-3 provides a valuable future resource for new residential units to meet the needs of population growth.

Figure 4.2 Existing Zoning within the USB by Major Use Category, 2020

Figure 4.3

Summary of Existing Residential Zoning Acreages within the USB, 2020

Land Use Analysis

The count of residentially zoned parcels within the USB is approximately 85,326. As indicated above the predominate zoning class for residential is R-1C followed by R-3. The minimum lot size in R-1C zoning is 8,000 sq ft and 6,000 in R-3 zoning. In recent years, R-3 zoning was modified to permit lot sizes smaller than the 6,000 sq ft and according to staff in the Planning Department, new development ranges between 10-12 dwelling units per acre. As a result, smaller lots for the vacant R-3 zone class were used to calculate future build-out scenarios. See Figure 4.3.

Using a similar approach for the two Industrial classes I-1 and I-2 but filtering out those parcels with an industrial zoning but a reported different land use such as retail, commercial, farmland, etc., the numbers change in interesting ways. As shown in Table 4.3, the number of industrial parcels with an explicitly industrial use, drops by 50% as does the total acreage. But the average parcel size increases slightly from 2.77 to 3.48 for I-1 and from 2.97 to 3.14 for I-2. This suggests the existing and future land area needs for industrial uses may be slightly smaller than the reported desirable size of 5.0-acre parcels. Slightly smaller parcel sizes make the valuable inventory of vacant land for industrial uses stretch a bit further.

Figure 4.3 Average Parcel Size of Existing Residential Uses within the USB, 2020

Table 4.3 Summary of Existing Industrial Zoning and Uses within the USB, 2020

Land Use Analysis

4.1.2 Existing Land Uses by Description

Figure 4 4 illustrates the distribution of land uses throughout the USB and Table 4.4 summarizes the count of parcels and acreage within each category and a value for the reported number of living units. In the PVA data, the number “LivUnits” has been captured in the R-Duplex/Half Duplex code (520) or MApartment codes (401, 402 and 403). The number of units reported for residential units only appears in these categories.

Figure 4.4 Existing Land Uses

EXISTING CONDITIONS AND GROWTH TRENDS REPORT

Land Use Analysis

The information from a land use description perspective is less granular for residential but more granular from a commercial/office/industrial perspective. Interesting to note the tally of LivUnits appears in the Multifamily land uses albeit with slightly different totals (37,255 in zoning; 37,057 with land use).

Visualized as a bar chart in Figure4.5, the land use descriptions that comprise the USB are 52% pure residential uses although residential is permitted in commercial/office/farmland and agriculture, and hospitality/recreation and golf designed parcels. The areas designated as HOA/Retention Basin/Open Space/Greenway or Other were not used in any analysis to accommodate future demands in housing or other services.

Figure 4.5 Existing Land by Use Description, Acreage and Percent of Total

Land Use Analysis

As shown in Figure 4.6, existing industrial uses total 857 parcels or count with an acreage of 2,556. This data is based upon the PVA land use code 410. However, this land use includes both light and heaving industrial zoning classes in addition to numerous commercial classes such as neighborhood business, wholesale and warehouse, business etc. For purposes of the existing conditions analysis, we assume the PVA assesses the use on the land use and not the zoning. There are a large number of very small parcels and a small number of very large parcels. The decline in the number of parcels with an increasing parcels size is steady.

Figure 4.6 Existing Industrial with a Land Use Code 410 by Parcel Size Range, 2020

Land Use Analysis

Figure 4.7 illustrates the physical location of the various parcels and their corresponding land use designations that were not considered developable for the build-out scenarios, with the exception of the Land Only category. There are a total of 16 parcels with this designation totally 20.9 acres.

Figure 4.7 Other Land Uses

Land Use Analysis

Figure 4.8 illustrates the nine subareas defined by the Fayette Alliance Housing Demand Study, modified slightly to conform to the USB. These areas were drawn for the existing conditions analysis to better understand the overall context of development within the City of Lexington.

Downtown: The Downtown subarea is the smallest of them measuring 0.57 square miles and consisting of 366 acres. Five percent of the land area is considered vacant. The boundaries are W. 3rd Street on the north, Midland Avenue on the east, Manchester on the south, and Newtown Pike on the west. Existing zoning is predominantly commercial and R-3. Existing land uses are a combination of Commercial/Office/Healthcare, Residential, and Government. Not surprising, the primary uses Downtown consist of Office, Hospitality/Recreation, Other Commercial Structures, and Parking. Somewhat surprising is the number of acres designated as Single-Family Dwelling/Platted Lot. This number totals 61.9 acres, second to the land area dedicated to parking uses. The number of developed parcels total 460 with an average size of 0.27. Approximately 1,525 more residential units are located within the Downtown subarea in the form of apartments, duplexes, townhomes, and condominiums. With an overall average parcel size of 0.47, redevelopment of vacant parcels within this subarea may require additional time and/or incentives.

East: The East subarea is the second largest measuring 14.1 square miles and consisting of 8,907 acres. A total of 20% of the land area is considered vacant. The area is located east of New Circle Road, south of Winchester Road, north of Alumni Drive, and all the land to the USB. This subarea includes the Hamburg Area, Gleneagles, Walnut Ridge, Todd’s Station, Lake Crossing, and several other neighborhoods. Expansion Area 2A which includes the planned Baptist Health development, as well as areas 2B, and 2C coupled with abundant vacant land zoned A-R and A-U, represent a large majority of the future growth potential within the USB. A rail spur from Downtown, serves an industrial area in the East near Richmond Road and New Circle Rd.

In Town Central: The In Town Central subarea measures 3.9 square miles and consists of 2,615 acres. Approximately 3.2% of the land area is vacant. Defined by Versailles on the west, the Downtown subarea border on the north, E. High/Tates Creek on the east, Mason Headley Road, and the southern boundary of the University of Kentucky on the south. This subarea consists of higher density neighborhoods supporting the prominent campus and hospital uses. Government uses account for over 30% of the land within this subarea. Undeveloped land within the Red Mile together with vacant commercial and residential present opportunities for future growth.

In Town North: The In Town North subarea measures 6.4 square miles and consists of 4,106 acres. Approximately 4% of the land area is considered vacant. The subarea is encompassed within Leestown and Richmond Road and New Circle Road. The small block length coupled with the numerous parks and Lexington Cemetery give this subarea a truly neighborhood quality. Railroad lines divide the higher density and lower density areas and serve industrial uses on the outer edges of the subarea.

Land Use Analysis

In Town South: The In Town South subarea measures 12.0 square miles and consists of 7,699 acres. Just 3% of the land area is considered vacant. This subarea encompasses all of the land area within New Circle Road, Leestown and Richmond Roads excluding the In Town Center and Downtown subareas. This subarea is predominantly single family, larger lots sizes defined by longer blocks and cul-de-sacs with a preponderance of R-1A – R1-D zoning. Commercial and business/office uses buffer the residential along the major thoroughfares. The highest number of Single Family Dwelling/Platted Lot land uses are located in this subarea. However, the In Town South subarea also contains the vast majority of I-2 or Heavy Industrial zoning and developed uses with the numerous railroad lines that serve the area between New Circle Road and Downtown.

North: The North subarea measures 9.0 square miles and consists of 5,799 acres. A total of 26% of the land area is vacant. Located north of New Circle Road between Georgetown on the west and Winchester on the east, the northern boundary is the USB. Expansion Area 3, the Dairy Farm property, and vacant A-R plus A-U zoned land provide ample area for future growth and development. The amount of vacant commercial is also significant totally 589 acres. The residential development pattern emulates that of the In Town South subarea with longer residential blocks and cul-de-sacs on the larger lot sizes permitted in R-1A – R-1D zones.

Northwest: The Northwest subarea measures 5.9 square miles and consists of 3,834 acres. Approximately 19% of the land area is considered vacant. This subarea is defined by the 1,124 acres of Industrial land use located east of New Circle Road. Bounded by Georgetown Road, New Circle Road and the USB, other than Industrial zoning, the subarea consists of smaller lot residential and a handful of vacant general purpose/horse farms.

South: The South subarea is the largest of them measuring 14.2 square miles and consisting of 9,125 acres. Nearly half of the total acreage is designated as Single Family Dwelling, Platted Lots built in neighborhoods with curvilinear streets, cul-de-sacs, and numerous parks. Clays Mill Road defines the western border, New Circle Road and Alumni Drive the north border and the USB the south and eastern borders. Approximately 14% of the land area is considered vacant, with 1,048 acres zoned as A-R or A-U, principally from Overbrook Farm. Redevelopment opportunities exist within the existing Fayette Mall and surrounding areas along Nicholasville Road.

Southwest: The Southwest subarea is the second smallest measuring 4.9 square miles and consisting of 3,163 acres. Nearly 75% of the total land area is designated residential land use and just 3% is vacant. New Circle Road defines the northern boundary, Clays Mill Road divides the Southwest from the South subareas and the USB forms the south and west edges. In additional residential uses, a total of 12% of the land is designated as HOA/Retention Basin/Open Space and/or Greenway, not considered developable to accommodate future growth.

Land Use Analysis

Table 4.5 identifies a conditional formatting technique to feature high (red colors) and low (green colors) acreage values by land use category within each of the subareas. The subareas do vary greatly in total size (shown in acres below the heading). Therefore, the amount of uses within each subarea may differ significantly. However, some highlights worth noting include:

• Downtown is the smallest subarea but also reports the fewest number of acres of any single land use, except parking structures

• 48% of the platted single family residential uses are located in the InTown South and South subareas

• Other than Downtown, the Northwest reports the fewest number of platted single family dwelling acres

Figure 4.8 Sub Area Descriptions

Land Use Analysis

• 44% of the industrial uses are located in the Northwest subarea

• 49% of the government uses are located in the InTown Central and North subareas

• 68% of the farmland uses are located in the East and South subareas

• 54% of the HOA/Retention Basin/ Open Space/Greenway is also located in the East and South subareas

• 52% of the retail uses are also located in the East and South

• 65% of the office uses are located in East, InTown North, and InTown South subareas

• Office uses in the remaining subareas total approximately 1/3 the acreage in the East, InTown North and InTown South subareas so significantly fewer acres overall

Table 4.5 Existing Land Uses by Subarea

Land Use Analysis

Evaluating the existing land use data for the M-Apartment use or those parcels that contain 4-19, 20-39 and 40 or more dwelling units by subarea indicates the highest number of units is located in the South subarea which has 608 acres of this land use designation as shown in the previous table. As illustrated in Table 4.6, the data for the InTown South and InTown Central subareas also reflect high numbers of apartment units. The build-out scenarios will promote infill development, particularly in the Downtown and within New Circle Road.

Southwest South Northwest North

InTown South

InTown North

InTown Central East Downtown

Table 4.6 Apartment Land Use and LivUnits by Subarea, 2020

Land Use Analysis

4.2 VACANT LAND

4.2.1 Vacant Land by Zoning Classification

The amount of vacant land within the USB is approximately 5,200 acres. However, there are parcels in transition or with development currently underway. This includes proposals currently in process with LFUCG, recently approved, or under construction. These acreages are referred to in the map as “in transition” and add 1,112 acres, technically bringing the total acreage to 6,312 Acreage in transition has been excluded from the future build-out scenario analyses. Figure 2.14 provides an accounting of the primary zoning categories by acreage. Figure 4.9 illustrates the location of the vacant land, including lands in transition, within the USB by zoning class.

Residential

Figure 4.9 Vacant Land by Zoning Classification

Land Use Analysis

A breakdown of the vacant parcels and acreage is provided in Table 4.7. Residential uses can be developed most zoning classifications. R-3 allows flexibility for residential development types and density and constitutes a significant number of acres to accommodate future residential growth.

Residential and Industrial zoning are of utmost importance to address future housing and employments needs. With the allowance of residential uses in other zones, coupled with flexibility in densities, there is sufficient vacant land area to accommodate housing demand for the next twenty years.

Figure 4.10 Vacant Land by Zoning 2020

Land Use Analysis

Table 4.7 Summary of Vacant Land and Land in Transition by Zoning Class

Land Use Analysis

The addition of the Dairy Farm land (identified as “In Transition” for I-1 Light Industrial, coupled with the Economic Development Zoned acreage plus vacant Industrial I-1 and I-2 represents approximately 946 acres available for employment in warehousing, logistics, manufacturing, etc.

Much of the vacant 946 acres of Industrial has unique aspects that render the land more challenging or less challenging for immediate development and absorption. Parcel size was a concern expressed by representatives of Commerce Lex. In particular, parcels 5.0 acres or larger are desirable and there are only eight (8) vacant I-1 parcels totaling 80.4 acres. There are zero (0) vacant I-2 parcels in this size range. The belief is that 5.0-acre parcels provide greater latitude to attract existing industrial users who want to expand and new local, regional, and national employers who need industrial zoning.

Figure 4.11 illustrates the locations of parcels 50+ acres. The larger parcels easily accommodate a wide variety of uses and larger master planned developments for both residential and industrial.

Figure 4.11 Locations of Vacant Industrial Parcels by Acreage Range, 2020

Land Use Analysis

However, analysis of over 800 existing I-1 industrial uses by parcel size indicates the mean acreage = 3.48; median = 1.27; and mode= 1.0. Therefore, the existing 51 parcels with I-1 zoning totaling 115 acres and ranging in size between 1.0 - 4.99 acres offer immediate opportunity to fill a certain type of employer demand. The ED zoning has financial stipulations that may be viewed as a hindrance or barrier to new development. Further, the 200 acres that is part of LFUCG’s Dairy Farm is not yet market ready and may require another year or more before industrial uses are constructed and employers hiring.

A similar analysis for vacant residential zoned lands, classified as PUD, R1A-R1T, R2, R3, R4 and R5 reveals a total of 41 parcels totaling 1,015.6 acres are five (5.0) acres and greater. As shown in Figure 4.12, the largest of these parcels are predominantly located North, Northwest, and East subareas. The total acreage doesn’t include the land in transition, nor any of the farm and agricultural land within the USB that can accommodate residential uses with development.

Figure 4.12 Locations of Vacant Residential Parcels by Acreage Range

Land Use Analysis

4.2.2 Vacant Land by Land Use Description

The land use code and descriptions provide greater detail on the vision for development of vacant land, e.g., retail, single family dwelling, platted lot, horse farms, etc. In total, approximately 3,332 acres or 53% of the available land for future development falls within the agricultural, development land farm, and horse farm designations. This may suggest a longer time frame before the land is available for development since they could require the extension of public infrastructure and/or service since they are predominantly located along perimeter of the USB.

Approximately 18% or 1,129 acres of the available vacant land is designated as residential and includes apartments. The total residential acreage is one-third of the available agriculture and farmland. Using the 6,000 square foot minimum lot size as a general measure of total units possible across all vacant residential land use designations, approximately 7,400 units can be constructed. However, as Figure 4.13 illustrates, the vacant land by land use map shows a large number of small parcels concentrated with the InTown North and InTown Central subareas. The parcels could be less attractive to many developers than the larger tracts of available land with a residential designation. Table 4.8 provides a summary of vacant land by land use including land in transition.

Land Use Analysis

Note: Vacant land inside the USB, including 1,112 acres of land n transition, tota s 6,312 acres

This analysis was conducted using PVA data and nput from the LFUCG Divis on of Planning for parcel zoning c assifications All agricultural and farmlands inside the USB are presumed to ultimately transition to developed land Discrepanc es between data fields were resolved via professional judgement of the attributes available in the PVA and LFUCG data as we l as Goog e Earth Pro aerial imagery

Figure 4.13 Vacant land by Land Use

Land Use Analysis

Table

Summary of Vacant Land and Land in Transition by Land Use Description

Housing Overview

5.0 HOUSING OVERVIEW

5.1 EXISTING HOUSING STOCK

Table 5.1 presents an overview of the total number of housing units in Fayette County and the surrounding counties as reported in the United States Census’ 2019 ACS. As such, the number of occupied households corresponds with the number of households reported in Table 2.2. Vacant units include both those for sale or rent as well as “Other Vacant”, which include houses not considered available, either due to condition or status. The Census reports 5,832 “Other Vacant” units in Fayette County in 2019, reducing the total available housing stock to less than 136,000 total units in the county.

Source: United States Census; American Community Survey

Table 5.2 shows that the share of housing units built since 2000 compared to older housing stock. A direct relationship between new construction and population and household growth is not possible given that small and variable segment of older existing units are removed from the inventory over time. However, a rough comparison between new construction and population and household growth illustrates the interconnection between people and housing. Both Fayette County’s and the regional share of housing units built since 2000 generally tracks with population growth. Table 5.2 also shows that housing construction was significantly higher both regionally and statewide in the first decade of the 2000’s than in the past ten years, reflecting both the early

Table 5.1 Housing Units by County

Housing Overview

2000’s housing boom that eventually resulted in the recession at the end of the last decade that negatively affected the real estate market for many years into the next decade.

Table 5.3 and Figure 5.1 presents housing development by type since 2000 in Fayette County, based on building permit data collected from the county by the U.S. Department of Housing and Urban Development (HUD). These data focus on new unit construction, as opposed to renovations or additions to existing structures. The data illustrates both the end of the housing boom in Fayette County around 2007 and the gradual recovery, although overall housing construction has not returned to the levels of the early 2000’s, potentially due to the limitations of available land inside the USB as well as the development of robust housing markets in many surrounding counties.

Figure 5.1 also illustrates transition from a primarily single-family market to a mixed market of single family and multi-family units. While the increase in multi-family housing is significant, the category is dominated by higher-density developments with 5 or more units per structure, with a much smaller range of two to four-unit structures.

Source: United States Census; American Community Survey; HUD

Table 5.2 Housing Units by Year of Construction

Housing Overview

Figure 5.1 Fayette County Single and Multi-Family Development

Housing Overview

Source: US HUD; US Census

5.4

type in Fayette County

the surrounding region. While single-family detached homes comprise the majority of housing units in Fayette County, its share is notably lower than surrounding counties. Fayette County’s share of larger structures with ten or more units is significantly higher than surrounding counties. Fayette County has much fewer mobile homes both in total amount and share than the surrounding counties. These distinctions reflect Fayette County’s position as the metropolitan center of the region.

Table

Fayette County Single and Multi-unit Development

Table

compares the inventory of total housing units by

to

Housing Overview

Six Adjacent Counties*

*Bourbon, Clark, Jessamine, Madison, Scott and Woodford Counties combined

Source: United States Census; American Community Survey

5.2 REAL ESTATE STATISTICS

The Lexington Bluegrass Association of Realtors has provided recent sales data for Fayette County and the surrounding counties. Table 5.5 and Figure 5.2 present total home sales by county for the region. The data reflects the effect of the housing downturn and recession in the previous decade in Fayette County as well as its subsequent recovery. The rise in sales in the housing markets in surrounding markets, particularly in Madison, Scott and Jessamine counties is also evident.

Table 5.6 and Figure 5.3 single out new home sales and demonstrate the precipitous drop in new construction at the time of the housing downturn and recession. While the downward trend of new construction in Fayette County has stabilized, new construction levels have not increased since the recession and have been flat for the past ten years. In contrast, annual new home construction in Madison, Scott and Jessamine counties has almost doubled from its levels in 2010. Since 2015, total sales of new homes in the surrounding counties have been higher than in Fayette County.

Table 5.4 Housing Units by Type

Housing Overview

Table

Total Home Sales by County

Figure 5.2 Total Home Sales by County

Housing Overview

Table 5.6

New Home Sales by County

Figure 5.3

New Home Sales by County

Housing Overview

Table 5.7 and Figure 5.4 present the trends in median sale prices for all homes sold in the region from 2005 to 2020. The pattern of rising sales prices over the past decade is evident in each county, and the proximity of sales prices among the counts with the largest housing market indicates the relative connections between the region’s housing markets. This trend in rising prices reflects similar conditions occurring nationwide. Fundamental issues affecting the housing market include an increase of new homebuyers entering the market along with sustained low mortgage interest rates spurring demand. Meanwhile, an overall downturn in new construction, potentially related to restrictive local housing policies or higher input costs, and a lower level of turnover in existing inventory limits supply.

Source: Lexington Bluegrass Association of Realtors

Median Sales Price: All Housing Types

Table 5.7 Median Sales Price: All Housing Types

Figure 5.4 Median Sales Price: All Housing Types

Housing Overview

The trend in upward sales prices is similar when comparing sales of single-family homes, primarily because they represent such a large share of the market. Table 5.8 and Figure 5.5 show the median single-family home sales in Fayette, Woodford, Scott, and Jessamine counties to be very similar in price and pattern, with the remaining counties displaying slightly lower median prices but with similar upward recent trends.

Source: Lexington Bluegrass Association of Realtors

Median Sales Price: Single-family Homes

Focusing in further on the median sales price of new single-family homes sales results in more notable differences between counties. As Table 5.9 and Figure 5.6 illustrate, home prices in counties with low volumes of new home sales show significant volatility year over year while still projecting a rising trend over time. New single homes in Fayette, Jessamine, and Woodford counties

Table 5.8 Median Sales Price: Single-family Homes

Figure 5.5 Median Sales Price: Single-family Homes

Housing Overview

tend to be priced higher than homes in Scott and Madison counties. The increased prices in Fayette County reflect its prime location and limited supply coming onto the market, as well as higher land and other input costs in general, such as exaction fees related to infrastructure development in Lexington’s three expansion areas. The higher costs in Jessamine and Woodford counties are likely related to the specific characteristics and larger lot sizes of recent housing developments among relatively lower overall units for sales. Conversely, lower land and development costs in Scott and Madison counties are contributing factors for median lower prices in those and other outer counties.

Median Sales Price: New Single-family Homes

Table 5.9 Median Sales Price: New Single-family Homes

Figure 5.6 Median Sales Price: New Single-family Homes

Table

Median Sales Price: First-time Single-family Homes

Figure 5.7 Median Sales Price: First-time Single-family Homes

Housing Overview

5.3 HOUSING OCCUPANCY AND COST

The general the characteristics of housing affordability begin with a survey of the household characteristics related to their housing situation. Table 5.11 presents the share of households living in owner-occupied units and renter-occupied units. While a majority of Fayette County’s units are owner-occupied, the ownership rate is the lowest in the region, which correlates to the higher rate of larger multi-family apartment developments and the large contingent of student and young working adults living in Lexington. Figure 5.8 shows the range of owner-occupied versus rental housing units, with Scott and Woodford counties having the highest rate of owner-occupied homes.

Source: United States Census; American Community Survey

Table 5.11 Housing Occupancy by Tenure and Monthly Costs

Figure 5.8 Housing Tenure by County

Housing Overview

Table 5.11 and Figure 5.9 present the average monthly housing costs for homeowners with mortgages and the average monthly rent. Housing costs are highest in Fayette, Scott, and Woodford counties, and run less than $200 higher than the statewide average, while the remaining counties are close to the Kentucky statewide average. Rental costs are highest in Fayette, Scott and Jessamine counties, approximately 20 percent higher than the Kentucky statewide average.

Monthly Housing Costs by County

Figure 5.10 shows the percentage of households who pay more than 35 percent of income to cover housing costs. This metric represents a maximum threshold for a household’s ability to affordably pay for housing. The share of homeowners who pay more than 35 percent is significantly lower than renters, who tend to have lower incomes than homeowners. The percentage of these homeowners in Fayette County is lower than most other counties in the region and the state. However, among renters, Fayette County, along with Scott and Madison counties, have the higher percentage of households paying more than 35 percent of income in rent. Fayette and Madison counties’ largest university student populations likely contribute to that statistic.

Figure 5.9 Monthly Housing Costs by County

Fayette County Madison County Scott County Jessamine County Clark County Woodford County Bourbon County Kentucky

Housing Overview

Households with High Housing Costs by County

5.4 AFFORDABLE HOUSING NEEDS ASSESSMENT

In addition to the overall comparable cost of housing in Fayette County and the surrounding counties, two distinct areas of housing affordability are relevant to consider. First, are issues regarding low-income residents who depend on housing subsidies. Second are issues regarding low and moderate-income residents attempting to find affordable housing within the market rate sector.

5.4.1 Affordable Housing Subsidies

As reported in the LFUCG needs assessment, approximately 18,000 households in Fayette County are severely cost burdened, meaning that they pay greater than 50% of their income from housing, and most are at or below 30% of the area median income. Roughly 15,000 low-income households need housing assistance in Lexington today. 9,000 low-income households currently receive assistance or are otherwise accommodated within the private market. This leaves approximately 6,000 households most of whom cannot find decent housing on the open market.

The 2020 LFUCG 5-year Consolidated Plan serves as a planning document and an application for federal funds managed by the U.S. Department of Housing and Urban Development (HUD). The plan states the intention to add or rehabilitate 500 units of rental housing. Over the 5-year period, it is anticipated that 300 households will be assisted.

Figure 5.10 Households with High Housing Costs by County

Fayette County Madison County Scott County Jessamine County Clark County Woodford County Bourbon County Kentucky

Housing Overview

In the last two decades, rising rents have removed an estimated 28,000 apartment units in Lexington from the range of affordability to low wage workers. Rising rents are expected to continue likely continue, resulting in an estimated loss of 400 affordable units per year.

A 2014 affordable housing study prepared by the consulting firm CZB for LFUCG suggests that additional subsidized units to meet unmet demand can best be realized through private market incentive programs. Policies such as density bonuses, transfer of development rights, tax increment financing, and land banking are proven tools for raising development revenue. The study recommends land use planning initiatives to achieve the explicit community objective of more affordable housing units and drive resource generation. Alignment of the zoning code and development regulations towards meeting the affordability challenge will reduce the gaps need and supply and increase long term economic competitiveness of Fayette County’s economy.

Sources: Lexington 2020 Five–Year Consolidated Plan – 2020 One-Year Action Plan, May 15, 2020

Lexington Draft Consolidated Plan – 2021 One-Year Action Plan, April 9, 2021

Lexington’s Affordable Housing Challenge and Potential Strategy February 2014 – CZB Study

5.4.2 Market Based Housing Affordability

The 2017 Fayette County Housing Demand Study set the maximum affordability threshold for lowto-moderate income households at 80 percent of the area median household income. In 2017, the study stated that the maximum affordable home price for this cohort was $170,000. According to the 2019 ACS, the most recent household median income for Fayette County is $58,356 (Kentucky: $52,295), for which $46,685 would represent 80 percent. According to the mortgage affordability calculator at www.nerdwallet.com localized for Fayette County, a household with that income, average credit, and ability to provide a 20 percent down payment could maximum afford a home price of $185,000. This is approximately 20 percent below the median sales price for all homes recently sold in Fayette County ($230,000), and 7.5 percent below the median sales price for first time buyers of single-family homes. As the housing study noted, rising home prices will continuously reduce the number of homes for sale with the affordability of low-and-moderate income households.

The housing study defined 120 percent of the area median income as the upper bound of affordability for “workforce housing,” a middle-income demographic that is also adversely affected by housing prices that outpace community wages. Accordingly, a household income of $70,000 with average credit and a 20 percent down payment can afford home prices up to $339,000,

An accepted ratio of housing costs to income is no more than 28 percent of monthly gross income

Using this metric for rental housing, households with incomes at 80% of the median area household income can afford a maximum of $1,089 in rental costs, compared to the median monthly rent of $896. However, more than 40 percent of Lexington households earn less than this 80% median income, with 26 percent earning less than $30,000 per year

Commercial Development

6.0 COMMERCIAL DEVELOPMENT

A current trends analysis was conducted for Fayette County and the surround six counties that constitute the study area. The map below displays the submarkets of this analysis. Fayette County is broken into three submarkets for analysis, East Lexington, West Lexington, and Downtown Lexington.

INDUSTRIAL ANALYSIS

Market Summary

There is approximately 60.4 million square feet of industrial inventory in Fayette County and the six surrounding counties (the region) as of Q1 2021 The regional industrial market continues to grow with strong overall fundamentals. The advance of e-commerce continues to create exponential growth in the industrial sector which has not experienced the impacts of the Covid-19 pandemic like other real estate assets. Demand for warehouse and logistics space is a major growth trend across North America and central and eastern Kentucky are no different. Specific sub-sectors of logistics such as cold storage and last-mile delivery have been driving demand in recent years.

Figure 6.1 Regional Analysis Submarkets

6.1

Commercial Development

Development patterns continue to be influenced by the USB in Fayette County. Developers and enduser tenants interested in bringing on larger-scale logistics centers have limited options for available greenfield land, although demand in Lexington is considerably less than major logistic hubs such as Louisville and Cincinnati. Infill industrial development for smaller-scale logistics, warehouse and manufacturing is driving the current market.

Market Breakdown

Fayette County has 31.8 million square feet as of Q4 2020. This is 53% of all industrial development in the region. Surrounding counties total 26.43 million square feet, 47% of industrial development. Fayette County is broken down into three submarkets; (1) West Lexington, (2) East Lexington, (3) Downtown Lexington. The West Lexington submarket has the largest inventory of 18.6 million square feet. This is followed by the East Lexington submarket. Scott County has 11.17 million SF of inventory; however, the Toyota Georgetown Assembly Plant makes up a significant portion of this inventory.

Source: CoStar

Figure 6.2 Regional Industrial Inventory by Submarket (Q4 2020)

Industrial vacancy rates are low across most of the region. The overall vacancy rate was 3.7% at the end of 2020 and trending downwards. Trends demonstrate that vacancy rates are expected to go below 3% into 2021, near historical lows. Vacancy rates under 5% typically demonstrate the need for new industrial development to match increasing demand. Vacancy rates are low in most counties. Only Bourbon County has a vacancy rate above 5%. Downtown Lexington has a small inventory but high vacancy rate due to small and relatively obsolete industrial stock. Redevelopment of older properties into more efficient uses in Downtown Lexington signifies that

Commercial Development

industrial stock adjacent to the downtown area may become more limited. Scott County, Jessamine County, and Woodford County all have industrial vacancy rates below 0.5%.

Source: CoStar

Leasing activity continues to be limited in recent years due to a tight vacancy rate and a lack of new industrial inventory in the market. Most leases signed are sub 20,000 square feet and no new leases have been signed over 100,000 square feet over the past year. The largest lease in 2020 was in Jessamine County, where Finlay Parker Holdings occupied 75,000 square feet. The largest activity in Fayette County was at Lexington Business Center where Framebridge and LaserShip signed 50,000 square foot and 24,200 square foot deals, respectively.

Figure 6.3 Regional Industrial Vacancy Rates by Submarket (Q4 2020)

Source: CoStar

Figure 6.4 Fayette County Industrial Annual Inventory and Vacancy Rate

The lack of available inventory has led to continued growth in industrial lease rates. Landlords are capitalizing on a tight vacancy rate by increasing asking prices, especially in high demand areas that have strong highway connectivity. 2020 experienced 4% rent growth and the overall market has posted seven years of positive rental growth rates. Average lease rates reached $6.30/SF at the end of 2020, up from $5/SF at the end of 2015.

Regional Comparison

Fayette County has received a larger share of new industrial development over the past 20 years (2000 to 2020). There has been 5.6 million square feet of new industrial delivered in Fayette County compared to 2.5 million square feet in surrounding counties. In the year 2000, Fayette County had a 50/50 split of industrial inventory with combined surrounding counties. In the past twenty years, Fayette County accounted for 70% of new industrial development bringing its regional share to 53%.

Jessamine and Madison County have the largest share of new industrial deliveries outside of Fayette County over the past 20 years with 750,000 square feet and 566,000 square feet of new inventory, respectively. Data demonstrates that Fayette County does not compete with adjacent jurisdictions for new industrial development, but rather faces strong competition from other regions such as Louisville and Cincinnati/North Kentucky.

Commercial Development

6.2 6.2 OFFICE ANALYSIS

Market Summary

There is approximately 22.4 million square feet of office inventory in Fayette County and the six surrounding counties (the region) as of Q1 2021 The regional office market remains healthy compared to other regions across the nation that are still experiencing the fallout of the Covid-19 pandemic. Lexington has historically been considered a smaller office market compared to largerscale metro areas such as Louisville, Cincinnati, Charlotte, and Nashville, however its size has allowed it to weather recent economic shifts. The region currently has a vacancy rate of 7% while Louisville and Cincinnati both have vacancy rates above 15% across their metros. The Lexington office market has demonstrated itself to be a stable market, with less speculative development occurring than in the larger markets. Speculative development can lead to higher overall vacancies both for new buildings and the older building stock that must compete with the new inventory for existing tenants. In contrast, the Lexington market appears to develop inventory with tenant arrangements more prominently established before development takes place.

Demand for office space in the region has primarily been for small-scale spaces. Space take-up has been centered around professional services, health, medical, administrative, and back-office tenants. Leasing activity as slowed due to Covid-19 as many tenants have either scaled back operations or are in “wait and see” modes prior to making a move. Construction of new inventory remains limited, with no major office projects under construction as of Q4 2020. Only 20,000 square feet of new space was completed in 2020.

Market Breakdown

Fayette County has 18 8 million square feet as of Q4 2020. This is 84% of all office development in the region. Surrounding counties total 3.6 million square feet, 16% of office development. Fayette County is broken down into three submarkets; (1) West Lexington, (2) East Lexington, (3) Downtown Lexington. Surprisingly, office space is well spread throughout Fayette County with each submarket having a strong share of inventory. The East Lexington submarket has the largest inventory of 7.2 million square feet followed by West Lexington at 6.3 million square feet.

Office vacancy rates are healthy across the region with only the East Lexington submarket having a vacancy rate higher than 10%. The average vacancy rate of 7% across all markets is lower than the historic average of 9%. Trends demonstrate that vacancy rates are likely to continue to increase in 2021 due to the ongoing Covid-19 pandemic and consolidation of office space by many tenants. Vacancy rates are quite low for surrounding counties; however, this is due to these areas having a small amount of inventory. Only Madison County has an inventory of over 1,000,000 square feet in size. Markets such as Jessamine, Clark, and Scott County have nearly zero available inventory which may demonstrate opportunities for new development if demand is warranted.

Source: CoStar

Source: CoStar

Absorption is very limited across all markets. The region featured only 16,000 square feet of net absorption in 2020 after a relatively strong 2019. Tenants are leasing space however absorption is affected by several large move-outs including Valvoline vacating 260,000 square feet of space and moving out of the Lexington market. New leases are primarily sub 20,000 square feet in size and

Figure 6.5 Regional Office Inventory by Submarket (Q4 2020)

Figure 6.6 Regional Office Vacancy Rates by Submarket (Q4 2020)

Commercial Development

are expected to remain small-scale. The impact of COVID-19 is felt in annual rent growth where the office market has experienced negative rental growth with reductions in asking rent across the board in the region. Rent increases are likely to be limited due to limited market movement and new tenants seeking significant space. Average market lease rates across the region stand at $17.40/SF which is down from 2019 levels but still near a 10-year high.

Source: CoStar

Figure 6.7 Fayette County Office Annual Inventory and Vacancy Rate

Regional Comparison

Fayette County has received a larger share of new office development over the past 20 years (2000 to 2020). There has been 4 6 million square feet of new office delivered in Fayette County compared to 1.3 million square feet in surrounding counties. In the year 2000, Fayette County had a 86% of office inventory with 14% combined in the surrounding counties. In the past twenty years, Fayette County obtained 78% of new office development bringing its regional share slightly down to 84%. Although market share of total inventory has decreased slightly over the past two decades, the total amount of new office development is still significantly weighed towards Fayette County as office tenants still prefer to be located near universities, amenities, and a large workforce.

Jessamine County has experienced the largest amount of new development other than Fayette County, and eclipsed Downtown Lexington in new inventory over the past 20 years. Downtown Lexington has had approximately 450,000 square feet of new inventory come onto the market since 2000, demonstrating that most of the new space has been constructed in suburban areas of East and West Lexington.

Commercial Development

6.3 RETAIL ANALYSIS

Market Summary

There is approximately 36.7 million square feet of retail inventory in Fayette County and the six surrounding counties (the region) as of Q1 2021 Like the office market, there has been a recent strain on the retail assert class due to the Covid-19 pandemic. The retail asset class has had strong historical performance in the region over the past several decades, even with shifting retail trends and the rise of e-commerce.

Retail demand is in growing residential neighborhoods where this is the need for daily shopping and services such as grocery, pharmacy, food & beverage, and medical. Many new developments are smaller infill retail or mixed-use retail projects rather than large-scale power centers. The Summit at Fritz farm which opened in 2017 is the largest new mixed-use retail project in the region and features approximately 300,000 square feet of leasable space.

Market Breakdown

Fayette County has 22 million square feet as of Q4 2020. This is 60% of all retail development in the region. Surrounding counties total 14.7 million square feet, 40% of retail development. Fayette County is broken down into three submarkets; (1) West Lexington, (2) East Lexington, (3) Downtown Lexington. The East Lexington submarket has the largest inventory of 12 million square feet. This is followed by the East Lexington submarket with 7.8 million square feet.

The region has a 4% vacancy rate which is lower than the 5% U.S. national rate. Vacancies are highest in enclosed malls as they have lost market share in recent years to e-commerce which has been significantly amplified due to the pandemic. Many analysts predict that it will be a struggle for enclosed malls to recover and increase their occupancy. Strip centers, power centers, and general retail have the lowest vacancy rates when comparing different retail typologies.

Although the region has a 4% vacancy rate, West Lexington and East Lexington both have higher than average vacancy rates, at 5.6% and 6.7% respectively. These are still considered healthy for the retail market, especially as retail has been hit hard by the pandemic. Scott County leads the way with a 1% vacancy rate, demonstrating high demand for retail spaces in growing residential areas of Georgetown.

Source:

Commercial Development

Retail leasing has slowed in recent years, especially for larger-scale tenants that would be in power centers or enclosed malls. Leasing has been focused on smaller spaces in the sub 30,000 square foot category. Leasing has been most popular in East and West Lexington which is where the greatest amount of residential growth has occurred in the past several decades.

Rental growth has been stable over the past decade and Lexington has averaged 2% rental growth since 2010. Rental growth is expected to slow in 2021 due to the pandemic, however average lease rates at $16.60/SF are at historic levels and are higher than Louisville. West Lexington has the highest asking lease rates of $19.13/SF and has also experienced the fastest rental growth.

Regional Comparison

Fayette County has received a larger share of new retail development over the past 20 years (2000 to 2020). There has been 5 million square feet of new retail delivered in Fayette County compared to 4 million square feet in surrounding counties. While the majority of industrial and office have continued to be built in Fayette County, retail has followed rooftops and located in areas of strong residential growth. In the year 2000, Fayette County had 62% of retail inventory with 38% combined in the surrounding counties. In the past twenty years, Fayette County obtained 55% of new retail development bringing its regional share slightly down to 60%.

East Lexington has experienced the most retail development out of all submarkets over the past two decades, encompassing 33% of all new construction in the region. This is followed by West Lexington and Jessamine County. Jessamine County has seen significant retail development in Nicholasville, especially in areas such as Brannon Crossing which is located adjacent to the Fayette and Jessamine County border.

7.0 FISCAL PROFILE

Impact to LFUCG finances should be an important consideration in deciding if, when, where and how the USB will be expanded. Knowing how different types of development patterns translate to revenue and expenditures should be considered alongside how they meet demand and how they meet LFUCG goals such as the provision of affordable housing, accessibility, or preservation of green space.

7.1 REVENUE

LFUCG’s annual revenue comes from several sources. Two in particular are directly influenced by land use and ultimately changes to the USB: Ad Valorem taxes and Licenses and Permits. Ad Valorem taxes are primarily property taxes assessed by the Property Valuation Administrator. Revenue from Licenses and Permits is dominated by the Occupational License Fees. Table 7.1 shows the breakdown of LFUCG revenue.

Source: LFUCG

Property taxes represent about 7% of LFUCG revenues or roughly $26million annually while Occupational License Fees represent about 55% of revenue or roughly $207million annually. Different types of land use and development patterns produce different amounts of revenue. To normalize the data for fair comparison, it is helpful to calculate a per acre value for revenue generated by the various land use types. Offices produce the most revenue per acre for LFUCG, mostly from the occupational license fee. Single family residential and agricultural uses generate the lease amount of direct revenue, however their presence supports the revenue generated in other areas. The revenue generated by the various land use types are illustrated in Table 7.2 and Figure 7.1. Only $156million of Occupational License Fee revenue was able to be attributed to

Table 7 1 LFUCG Revenue Sources

specific land uses in Fayette County. The remaining $50million is being paid from addresses outside Fayette County. Property tax revenue is estimated based on assessed value, therefore it will not equal what was actually collected and represented in Table 7.2.

Table 7.2 LFUCG Revenue by Land Use Type

Fiscal profile

Another way to look at revenue is geographically. Figures 7.2 and 7.3 illustrate where in Fayette County property taxes and Occupational License Fees are generated. Lexington if typical of other cities, however the influence of the USB is evident in both maps. Figure 7.4 illustrates the combination of property taxes and occupational license fees.

Figure 7.1 LFUCG Revenue by Land Use Type

Figure 7.2 Property Tax Value per Acre

Figure 7.3

Occupational License Fee Value per Acre

7.2 EXPENDITURES

Expenses are equally important as revenue when considering the impact of development on LFUCG finances. Most expenses can be attributed evenly across the county, however the costs of operating and maintaining certain infrastructure varies by geography. Table 4.3 shows annual amounts for LFUCG’s major expense categories.

Figure 7.4 Combined Property Tax and Occupational License Fee Revenue

Most of LFUCG’s expenses can be assumed to apply evenly across the county and are not directly tied to the type of development. Others, such are water, sewer, roads, and stormwater systems are dependent on development patterns. To simplify analysis, a cost per acre to operate and maintain infrastructure was calculated within the USB and another outside the USB based on the amount of infrastructure present. The cost is calculated by multiplying the linear feet of infrastructure by an industry standard cost coefficient. A more detailed analysis is possible, however for this study it is assumed the cost of infrastructure is reasonably consistent withing the USB as well as outside the USB. Table 7.4 shows the breakdown of assumed infrastructure costs.

The value in this type of analysis is that it demonstrates that some types of development cost cities more than they generate in revenue. That doesn’t mean that all development patterns should

Table 7.4 Infrastructure Cost Estimates

Fiscal profile

generate more than they cost, however there must be an appropriate balance for city finances to be sustainable. Having an understanding of this dynamic should help make decisions about what types of development should occur when the USB is expanded. Figure 7.5 illustrates where in Fayette County generates revenues that exceeds the average per acre costs and by how much. Areas in green illustrate the essential sources of land use-based revenue generation for LFUCG.

Other Revenue, 144,775,000

Property Tax, 25,975,000

Business License

Fees, $208,250,000

Roads, $71,937,989

Pipes, $69,800,990

General Government, $379,000,000

Revenue

Expenses

Figure 7.5 Revenue Related to Average Per Acre Cost

Infrastructure and community facilities

8.0 INFRASTRUCTURE AND COMMUNITY FACILITIES

Evaluating the USB and making decision about possible expansion should be informed by the current provision of infrastructure and certain community facilities and services, including roads, public transit, water, sewer, schools, libraries, community centers, parks, and public safety. The provision and funding of certain infrastructure and community facilities in the Expansion Areas is managed and funded through the Exactions Program administered by LFUCG. This program ensures that “new development activity is served by adequate public facilities and bears a proportionate share of the cost of improvements necessary to provide roads, parks, open space and sanitary sewer treatment, sanitary sewer transmission capacity and stormwater management facilities in the Expansion Areas of Lexington-Fayette County; and to mitigate the loss of rural landscape in the Expansion Areas by providing for an exaction for preservation of undeveloped land within the Rural Service Area in the vicinity of the Expansion Areas or of community-wide significance.”

8.1 TRANSPORTATION

8.1.1 Roads

LFUCG and KYTC are responsible for building and maintaining roadways in Fayette County with planning assistance from the Lexington Area MPO. Roadway service inside the USB is robust. The 2045 Metropolitan Transportation Plan (MTP) includes a few projects that involve completely new roads. Most projects involve widening and multimodal improvements to reduce congestions. Several of these projects will increase the development potential of areas within the USB, particularly the Hamburg Connector in Expansion Area 2 and the Citation Boulevard extension to Russell Cave Road

8.1.2 Transit

LexTran is responsible for providing transit service in Lexington, which includes 26 fixed-route bus lies and paratransit to customers eligible for special service Approximately 45% of Lexington parcels are within one quarter mile of a fixed-route bus line, conventionally considered the threshold for considering a destination accessible to transit. While LexTran provides paratransit service throughout the county, federal paratransit regulations only require the provision of service for trips within three quarters of a mile from a regular fixed route. Figure 8.1 illustrates the coverage area of current fixed-route bus lines, along with quarter mile and three quarter mile buffers.

Infrastructure and community facilities

8.2 WATER AND SEWER

LFUCG’s Division of Water Quality is responsible for the city’s sewer system and treatment plants, while water service is provided by Kentucky American Water. Sewer service outside the USB is extremely limited and is focused on key public facilities including the Bluegrass Airport, Keenland, Kentucky Horse Park and the Federal Medical Center. Water service is available to large parts of the County outside the USB, but like sewer service, it is concentrated within the USB. Extension of water and sewer service into the Expansion Areas is governed under LFUCG’s Exaction Program and varies by area and correlated with the level of development in each area. Service provision is greatest in Expansion Area 2, where much development has occurred. Water and Sewer infrastructure in Expansion Area 3 is partially constructed, whereas service is not yet available in Expansion Area 1. Figures 8.2 and 8.3 illustrate current water and sewer service within the USB.

Figure 8.1

Infrastructure and community facilities

Figure 8.2 Water Service Coverage

Infrastructure and community facilities

8.3 SCHOOLS

Fayette County Public Schools (FCPS) serves over 42,000 students with 37 elementary schools, twelve middle schools, six high schools, and three technical centers. FCPS determines the timing and location of new schools according to the regulatory guidelines of the Kentucky Department of Education. FCPS has acquired land and is planning for a new middle school and new elementary school in Expansion Area 2. FCPS is also planning to consolidate its existing career and technical education (CTE) programs – currently split between two campuses at Eastside Technical Center and Southside Technical Center in a new single location in downtown Lexington.

Figure 8.3 Sewer Service Coverage

Infrastructure and community facilities

FCPS is not required to site new facilities within the USB, however growth scenarios should reserve sufficient space for new schools needed to serve areas with new and growing populations. Figure 8.4 shows the location of FCPS’s current school facilities.

8.4 PUBLIC SAFETY

Lexington currently has 24 individual fire stations, 20 of which are located inside the USB. The Lexington Fire Department has a Class 1 rating by the Insurance Service Organization (ISO) and is one of only eight departments in Kentucky with that top designation. The Class 1 rating represents the quality and coverage of department facilities and infrastructure, as well as service metrics, including response time, indicating that sufficient coverage exists for all areas within the USB.

Figure 8.4 FCPS School Locations

Infrastructure and community facilities

The Lexington Police Department divides the County into three sectors: East, and Central, and West. Sector boundaries were last drawn in the 1990’s based on census tracts and are set to be reevaluated when data from the 2020 Census becomes available. Each sector is divided into four beats, which are further divided into two sub-beats, which are the basis for the allocation of resources for patrol shifts. Resources for patrol shifts are determined by population and call volume, with particular emphasis on priority 1 and 2 calls which deal with imminent danger to life or property. Call volume and patrol resources have notably increased in the East sector due to the significant growth in this part of the city in the past 20 years.

As the County’s population grows, LFUCG will have to expand police, fire, and EMS services and facilities. While Lexington does not have set standards for population served or travel times for police and fire stations, growth scenarios should reserve space for new police and fire stations.

Figure 8.5 shows the current distribution of fire stations and police sectors.

Figure 8.5 Police and Fire Coverage

Infrastructure and community facilities

8.5 PARKS AND RECREATION

Lexington maintains just over 5300 acres in 101 parks and golf courses across the county. Only four of these parks are located entirely outside the USB. LFUCG also operates Lexington operates 6 libraries spread evenly throughout the urban service area. While Lexington does not have level of service requirements for libraries, parks, and recreation facilities, growth scenarios should reserve space for additional parks. Figure 8.6 shows the distribution of Lexington’s current libraries, parks, and golf courses.

Figure 8.6 LFUCG Parks

9.0 POPULATION GROWTH TRENDS

The growth in population and households is the foundation for estimating the additional supply of housing that will be required in the future. In correspondence with the 20-year time horizon of the Imagine Lexington and conventional comprehensive planning analysis periods, a projection of population and households in the year 2040 is appropriate. Similar to most planning efforts in Kentucky, when LFUCG developed the Imagine Lexington plan, they used population projections provided by the Kentucky State Data Center (KSDC), which is the state’s lead agency in the U.S. Census Bureau’s State Data Center Program and Kentucky’s official clearinghouse for Census data

The last county level projections issued by the KSDC were completed in 2016 and project to 2040. The KSDC’s projections for Fayette County are presented in Table 9.1.

Source: Kentucky State Data Center

The most recent U.S. Census American Community Survey (ACS) in 2019 provided new estimates and it is notable that the 2019 total population estimate for Fayette County is 323,152 and the total household estimate is 129,784, more than 10,000 lower than KSDC’s 2020 projection for both metrics. County level population estimates from the 2020 Census will be available in the near future, which will then serve as the definitive estimates. Until then, this disparity between the KSDC and ASC offers an opportunity to create conservative and full ranges for future household projections, with the KSDC’s projections as the high bound of the range and the most recent 10-year county estimates (2010 Census and 2019 ACS) representing the lower bound of the range.

As households ultimately serve as the proxy for occupied housing units, it is possible to simply subtract the future KSDC projection from the 2020 projection to establish the high bound number of new households that will need to be accommodated in the future. For example, based on KSDC’s 2040 projection, a total of 41,182 additional households will need to be accommodated in 2040. Given that LFUCG used these KSDC projections for its analysis, a similar number of households was also assumed for the Imagine Lexington plan.

As reported in Chapter 2, population growth in Fayette County and the surrounding region was stronger in the period between 2000 and 2010 than is has been in the past decade. While many factors may have contributed to the recent slower growth, including lingering effects of the housing downturn or the increasing challenge of acquiring land and developing new housing inside the USB,

Table 9.1 Kentucky State Data Center Population Projections, Fayette County

Population Growth trends

this recent trend is apparent throughout the region and the state. As depicted in Table 9.2, the compound annual population growth in Fayette County since 2010 is consistent with the region and Madison and Jessamine counties. Only Scott County has a higher growth rate, and even it has lowered significantly from the first decade of the millennium. For this reason, using the population growth rate for Fayette County from 2010 to 2019 provides a defensible lower bound for future population growth. According to this rate of 0.99%, Fayette County will need to accommodate 29,742 new households by 2040.

20 Year Household Growth Trendlines

Table 9.2 Growth Rate Comparison of Population by County

Table 9.3 20 Year Household Growth Trendlines

10.0 COMMERCIAL GROWTH TRENDS

10.1 INDUSTRIAL

GROWTH TRENDS

10.1.1 Considerations Moving Forward

Industrial development has slowed over the past decade in Fayette County. 2000 to 2006 saw inventory grow by 4.7 million square feet, while 2007 to 2020 experienced 840,225 square feet of inventory growth. Not only has there been significantly less new industrial development occurring, but inventory in certain years decreased due to demolition of obsolete product. The Downtown Lexington submarket experienced negative inventory growth between 2007 to 2020 as certain sites transitioned into other uses.

This slowdown of new industrial inventory in Fayette County over the past decade has likely occurred due to multiple reasons. This includes:

• A reduction of readily available and low-cost industrial land.

• Prominence of Louisville and Cincinnati as major industrial growth nodes.

• Reduction in manufacturing employment.

• Logistics and E Commerce Fulfillment acting as the primary growth typology for industrial space – Louisville and Cincinnati/Northern Kentucky are the logistic hubs for the region. Economic analysis demonstrates that the Transportation & Warehousing sector has grown faster in Fayette County than the U.S. average, however this sector is still much smaller than the aforementioned Metro areas

Real estate experts are predicting that industrial will be one of the top real estate investments moving forward, especially when product is geared towards e-commerce. Tight vacancy rates, increasing rental growth rates, along with a resilient industrial real estate sector demonstrates strong opportunities for Fayette County moving forward. Pent up demand for new and modern industrial product can allow Fayette County to grow its industrial base and capitalize on strong market fundamentals if well-located and serviced industrial land is available for development at appropriate price points.

10.1.2 Trendline Analysis

Conservative and Full Trendlines project 20-year demand between 1.3 million square feet and 5.6 million square feet of new industrial space in Fayette County. This translates between 65,000 square feet to 278,000 square feet on an annual basis. Based on the current metrics of Lexington’s industrial market and the opportunities for growth moving forward, it is feasible for Lexington to

Commercial Growth Trends

target the moderate growth scenario. Collaborative partnerships between economic development, landowners, and industrial developers are required to target specific sectors and end-user tenants and make the moderate scenario a reality.

20 Year Industrial Growth Trendline (Cumulative SF)

Source: MXD Development Strategists

Figure 10.1 20 Year Industrial Growth Trendline for Fayette County (Cumulative SF)

10.2 OFFICE GROWTH TRENDS

10.2.1 Considerations Moving Forward

The office market continues to face challenges due to the fallout of the Covid-19 pandemic. Limited new development in recent years has demonstrated that office does not have similar investment potential in Fayette County in comparison to the industrial or residential asset classes. Only 1.8 million square feet of new office inventory has come online over the past 15 years, however vacancy rates have continually stayed above 7%. The Location Quotient for Fayette County in the Economic Analysis demonstrates that office-based used such as “Professional Technical & Scientific”, “Finance & Insurance”, “Government” and “Information” have not grown considerably compared to the national average. These economic sectors drivers are for new office space and Fayette County has fallen behind according to U.S. Census data.

Vacancy rates will need to decrease, and rent will need to stabilize or show future growth to demonstrate investment potential for commercial developers. Shifts in how and where people work

Commercial Growth Trends

that have emerged from the pandemic will also need to be considered moving forward. Companies may consider downsizing office operations or limit office expansion as certain employees work from home or on flex schedules. These are considerations that will likely impact future demand and absorption in the Lexington market, especially in the next several years.

10.2.2 Trendline Analysis

Conservative and Full Trendlines project 20-year demand between 2.5 million square feet and 4.6 million square feet of new office space in Fayette County. This translates between 123,000 square feet to 231,000 square feet on an annual basis. Based on the current metrics of Lexington’s office market and the relative slow growth of office-centric economic sectors, it is feasible for Lexington to target the conservative growth scenario. A move to a moderate growth scenario will require vacancy rates to decrease and constrain supply, and growth in office-centric sectors that will generate demand.

20 Year Office Growth Trendline (Cumulative SF)

Conservative Full

Source: MXD Development Strategists

10.3 RETAIL GROWTH TRENDS

10.3.1 Considerations Moving Forward

Market experts state that retail may be the hardest hit real estate asset class due to the Covid-19 pandemic, however Fayette County has been able maintain stability across most typologies.

Figure 10.2 20 Year Office Growth Trendline for Fayette County (Cumulative SF)

Commercial Growth Trends

Construction was slowing down over the past few years and a limited amount of product has been delivered since the Summit at Fritz Farm.

Residential growth and increased spending patterns will sustain the retail market; however, ecommerce is predicted to flourish and grow over the next decade as more and more people shop online. Demand is expected to continue from neighborhood-oriented retail. Investors and developers are likely to limit riskier new projects in coming years such as destination retail and large-scale mixed-use development. Relatively strong fundamentals such as low vacancy and stable rental growth, coupled with limited recent retail development exhibits potential near-term opportunities for small-scale infill in areas that are underserved. Future residential development in Lexington’s undeveloped areas such as Overbrook Farm will be the triggers to generate larger-scale opportunities for new retail development.

10.3.2 Trendline Analysis

Conservative and Full Trendlines project 20-year demand between 2.2 million square feet and 5.0 million square feet of new retail space in Fayette County. This translates between 110,000 square feet to 250,000 square feet on an annual basis. It is recommended that Fayette County target a conservative growth scenario due to slower local population growth rates, rising e-commerce spending, construction of smaller-scale brick-and-mortar retail, and lower retail requirements per capita. A significant rise in population growth for Fayette County in the coming years may indicate increased demand for new retail development. It will also be beneficial to explore renovation and increased density of retail on aging and underutilized sites in fast growing neighborhoods.

Source: MXD Development Strategists