Commercial Real Estate in Frankfort, KY: What It Takes to Lease to the State

Corridor Notes · Frankfort & Franklin County

Commercial real estate in Frankfort, KY runs on a tenant that does not exist anywhere else in the state: the Commonwealth of Kentucky itself. That single fact rewrites the underwriting. A Frankfort office building is not competing for a private tenant who signs after a tour and a term sheet — it is competing inside a statutory procurement written into KRS 56.803, where the award goes to a written best-and-final offer opened in public, and where a building can be disqualified on parking before anyone reads the rent.

Who is the anchor office tenant in Frankfort?

State government is. Kentucky’s Finance and Administration Cabinet leases land and buildings on behalf of state agencies through its Division of Real Properties, which operates from the Bush Building at 403 Wapping Street in Frankfort.

The Division publishes its own charter. Its responsibilities include “maintaining an accurate inventory of owned and leased state property; managing state government parking facilities in the Franklin County area; leasing land and/or buildings for use by state agencies,” per the Kentucky Finance and Administration Cabinet. Read that list slowly if you own Frankfort office product. One office runs the inventory, the parking and the leasing for the largest employer in the county.

This is the structural difference between Frankfort and Lexington that most investors miss. In Lexington you underwrite a market of many private tenants. In Frankfort a meaningful share of the office demand flows through one procurement desk, on one set of rules, and those rules are public.

Does the state even look outside its own buildings first?

No — it looks inside first, by statute. Before any private lease is solicited, the department must check whether existing state-owned space can meet the need.

KRS 56.803(2) requires that the Department for Facilities Management “shall review each agency space request to determine whether space suitable to meet the agency’s reasonable needs may be available in a state-owned or occupied building.” Only if there is no suitable state-owned space does the private market get a shot, under KRS 56.803(3).

For a Frankfort landlord, that is the first underwriting input and it is free to check. The Commonwealth publishes its owned and leased holdings through the Kentucky Transparency property search. A building whose only realistic tenant is an agency the state can already house elsewhere is a different asset than one filling a gap the state cannot fill internally.

How does Kentucky actually award an office lease?

Through a public, written, multi-stage competition with a hard deadline — not a negotiation. Miss the stated time and date and you are out of the process entirely.

The sequence in KRS 56.803 runs like this:

• Public notice. The department gives notice in the county where space is sought, stating the type of space, general location, square feet needed, and “the last time, date, and place that written responses shall be received.”
• Written response only. A property owner “shall respond in writing on or before the time and date designated,” and the department “shall deal only with individuals who have submitted written responses” by then.
• Public opening. All responses received on time are opened at the same time and publicly read or posted.
• Specifications out. Within ten business days the department sends every respondent the same general requirement specifications — and states whether a reverse auction will be used.
• Site evaluation. The department inspects each proposed space; the owner must provide access; findings go on a site evaluation form.
• Best and final. Each owner is invited to submit a written proposal on a department form. The statute is blunt: “A written proposal shall constitute a best and final offer.”
• Award. The commissioner assesses proposals on location and public accessibility, condition and state of repair, occupational health and safety conformity, fire and sanitation conformity, proposed rental rates, utility and janitorial costs, agency moving costs, reverse-auction terms, and conformity with the specifications.

Two details in that list change how you price a state deal. First, the reverse auction: the department “may require any terms of the proposal to be the subject of a reverse auction.” Your rent can be bid down in the open against competitors you can see. Second, the award criteria include utility and janitorial costs and agency moving costs — expenses that sit outside base rent in a normal private negotiation. A cheaper rent in a costlier-to-operate building can lose.

What does the state require of the building itself?

Code compliance plus a parking ratio that is far heavier than most owners assume. The published solicitations are the cleanest evidence of what the Commonwealth expects.

Take a real one. In an Invitation to Lease Space issued as PR-5768, the Finance and Administration Cabinet sought “approximately 6,587 square feet of office space with 43 reserved parking spaces” in Flemingsburg, Kentucky, with proposals due in writing by 10:30 a.m. on May 31, 2023. That solicitation was for Fleming County, not Franklin — but the requirement language is the Commonwealth’s standard, and it is the clearest published statement of the bar.

Do the arithmetic on those two published figures: 6,587 square feet against 43 reserved spaces is roughly one reserved space for every 153 square feet of office. Reserved, not shared. That is the number that quietly eliminates handsome downtown buildings with a dozen spaces behind them, and it is why a plainer building on a larger lot can beat them.

The same notice states that any property selected “must meet OSHA specifications, as well as ADA guidelines and all applicable building codes as enforced by the Kentucky Division of Building Code Enforcement.” It also rules out a shortcut many owners try: “Fax and email proposals will not be accepted.”

Item	Private tenant, Lexington	State agency tenant, Frankfort
How you get in front of the tenant	Broker relationship, listing exposure	Public notice in the county; written response by a stated time and date
Negotiation	Offer, counter, counter	Written proposal is a best and final offer; terms may go to reverse auction
What is scored	Rent, term, tenant improvements, credit	Rent plus utility, janitorial and agency moving costs, condition, accessibility, code conformity
Parking	Market convention	Reserved spaces specified in the solicitation
Ownership disclosure	Rarely requested	Required before execution for entity landlords under KRS 56.809
If you lose	You may never learn why	Statutory notice of the selected property and a right to examine the leasing records

What must an LLC or partnership landlord disclose?

Every owner at five percent or more, by name, before the lease is signed. This is the provision that surprises investors who hold Kentucky property inside a layered entity.

KRS 56.809(1) requires that when the owner of property selected to be leased to the Commonwealth is “a corporation, partnership, business trust, or organization, a disclosure statement providing a list of the names of all persons owning five percent (5%) or more of the shares in such entities and the names of all partners, including silent and limited partners, shall be furnished to the Finance and Administration Cabinet prior to the execution of the lease agreement.”

Read “including silent and limited partners” twice. Passive capital that expected to stay quiet does not get to stay anonymous on a state lease. If you are syndicating a Frankfort office acquisition with the Commonwealth as the target tenant, that expectation belongs in the operating-agreement conversation at the front of the deal, not the week before signing.

Will the state lease a building that does not exist yet?

Yes, with conditions. Solicitations invite “proposals to lease existing properties and/or proposals to construct new facilities,” so a well-located Frankfort site can compete against standing inventory.

KRS 56.8035 draws the line. A new-construction proposal “shall be considered if it does not contain any provision for a lease-purchase or an option to purchase,” and a proposal carrying a lease-purchase or purchase option is only considered when it responds to a solicitation that asked for one. Build-to-suit is on the table; a build-to-suit with a back-door sale attached generally is not.

What this means if you are buying Frankfort office product

Underwrite the procurement, not just the rent roll. In my experience buyers arriving from Lexington carry a private-market playbook into a public-procurement town and price the wrong risks. They spend their diligence budget on finish quality and their negotiating energy on rent, then find that the deciding variables were the parking count, the operating-cost line the Commonwealth scores against you, and a submission deadline that does not move.

The habit worth building is boring and cheap: read the published solicitations for your county before you write an offer, and treat the general requirement specifications as the real spec sheet for the building you are buying. Everything the Commonwealth will ever ask you for is written down somewhere public. The same discipline applies whether you are looking at a state-tenant building in Frankfort, a triple net lease in Lexington, or medical office space in Lexington — the tenant’s own rules tell you what the asset has to be.

Frankfort is a short drive from Lexington and a different market when you get there. If you are running a timeline on either side of that drive, the mechanics in how long it takes to close on commercial property in Kentucky still apply — you are just adding a procurement calendar on top of a closing calendar.

Where are Kentucky’s invitations to lease space published?

Through the Division of Real Properties in the Finance and Administration Cabinet. KRS 56.803(5)(a) requires adequate public notice to reasonably inform owners with property to let within the county, and provides that the notice “may include posting on the Internet or newspaper advertisements.” Watch the county where the space is sought, not just Frankfort.

Can I find out why my building lost a state lease?

Partly, yes. KRS 56.803(19) requires the department to notify each timely respondent who was not awarded the lease of the selected property, and to tell them they have a right to examine the leasing records relevant to the awarded lease. If the Capital Projects and Bond Oversight Committee will review the award under KRS 56.823(2), the notice must say so.

Does the state have to take the lowest rent?

No. Under KRS 56.803(15) the commissioner chooses “the best proposal in the interest of the Commonwealth” based on the full assessment in subsection (14), and may reject all proposals if none is in the Commonwealth’s best interest. Rent is one factor among condition, accessibility, code conformity and operating costs.

Last updated: September 6, 2026.

By Marcos Gil, REALTOR® — Keller Williams Commonwealth · KY Real Estate License No. 296259 · Call or text (859) 310-1209.

Educational information about Kentucky’s state leasing procedure and commercial due diligence. Not legal or procurement advice, and not lending advice — I am a real estate agent, not your lender. Statutes are amended; verify the current text of KRS 56.800 to 56.823 and any live solicitation with the Division of Real Properties before you rely on it.