Restaurant giant Yum Brands' monthslong hunt for a new corporate headquarters has culminated in a deal to occupy space in one of the largest office buildings in downtown Louisville, Kentucky.
The parent company of Taco Bell and KFC inked a deal for several floors in the PNC Tower with plans to relocate several hundred of its employees to the city's central business district. Yum signed for nearly 74,200 square feet in the 39-story high-rise, delivering a boost to an area that is otherwise relatively short on high-profile leases.
The company confirmed the 10-year deal in a statement, adding that it plans to relocate to the building at 101 S. Fifth St. by late next year, following some renovations and finish-out work. The future hub covers the second through fifth floors, with the space expected to accommodate upward of 550 Yum employees.
The search for a new corporate landing spot came after Yum released plans earlier this summer to donate its nearly 30-acre campus at 1441 Gardiner Lane in the city's Watterson Park area to the local school district. The school district plans to take over the space once the Yum officially moves downtown.
“Our new offices will support the flexibility, creativity and collaboration of our unrivaled culture and talent," Yum Brands CEO Chris Turner said in a statement. The new downtown outpost's location near restaurants, entertainment and arts venues was especially attractive, and the executive added that it will provide the company with "opportunities that lie ahead in the next chapter of Yum Brands in Louisville.”
The world's largest fast-food operator, which also oversees Pizza Hut and Habit Burger Grill, is also one of Kentucky's largest publicly traded companies. It recently reported more than 61,000 restaurant locations in roughly 150 countries, a footprint that Yum is looking to expand further this year.
Turning up the heat
The relocation is one of the ingredients Yum Brands is testing as it looks to revamp its corporate image.
The global restaurant giant earlier this year broke out KFC from its headquarters campus, moving the chain to the greater Dallas area while maintaining its primary headquarters in Kentucky. Taco Bell, meanwhile, is based in Irvine, California.
The company's brands are also facing fierce competition from other restaurant operators in the battle for consumers at a time when many are pulling back on discretionary spending due to an increasingly uncertain economy.
Many restaurant-chain owners have struggled to boost customer traffic in the face of rising inflation and weakening consumer sentiment. Budget-conscious customers are trading down to cheaper offerings or opting to stay at home altogether, meaning operators have had to toe a thinning line between winning over demanding diners and managing their own rising expenses.
Yum has, for the most part, been able to log higher profits and sales across its business, as fast-food brands have largely benefited from customers adopting a more value-oriented mindset.
Yum's commitment to downtown Louisville comes as the area has lost a handful of prominent companies that landlords have struggled to backfill. Over the past several months, tenants such as law firms Brown Carrington and Steptoe & Johnson, the local district of the United States Army Corps of Engineers and global accounting firm Forvis Mazars have all unveiled plans to move out of the downtown area.
While downtown Louisville's 10.8% vacancy rate is well below the national average of more than 14%, according to CoStar data, it's more a product of fewer deals and limited inventory rather than healthy demand. Tenants in the market have offloaded 220,000 square feet more than they signed on for over the past year, all of which was concentrated around downtown.