Louisville is no longer simply a city known for horse races, bourbon and tobacco. It has become a city with a diverse and growing economy with heavy concentrations of medical employment, an international logistics hub and a stable manufacturing base. It has grown to become the dynamic northern edge of the Southeast, and investors from all over the nation are flocking to it.
Louisville is an established riverfront city in the Southeast with a growing population, diversification of employment and an attractive multifamily supply/demand balance. The area is home to 12 Fortune 500 companies, three of which are headquartered in the city. The metro is a nationally recognized regional distribution and warehousing hub serving major operations such as Ford Motor Co., General Electric and many others. The city has seen steady job growth since the recession. In fact, the U.S. Bureau of Labor Statistics estimates that between July 2010 and July 2016, 80,000 new jobs were created.
With a very successful series of major distribution facilities now open and future capital investments in distribution parks planned, Louisville continues to be a hotbed in the logistics industry. Leading this remarkable transformation to a logistics giant is the development and expansion of UPS Worldport, the corporation’s main global air hub for its distribution business across the United States. UPS plans to add 300 new full- and part-time jobs by 2017 and invest nearly $310 million in its Centennial Hub sorting facility.
Dane Wilson,
CBRE | Central Midwest
Steve LaMotte Jr., CBRE | Central Midwest
This significant series of improvements has steadily boosted employment over the last few years and has become a regional draw for those seeking employment and participation in Louisville’s economic growth. The additional jobs created over the past five years in logistics have had a multiplier effect in several areas including retail and office support positions.
Additionally, Ford recently announced an investment of $1.3 billion to upgrade and expand its Kentucky Truck Plant and will be hiring 2,000 additional employees.
New Construction
Development activity in the Louisville multifamily market could be described as negligible at best over most of the past 15 years. Recently, however, several developers from Indianapolis, Nashville and beyond have taken advantage of the under-supplied Louisville market and have joined the ranks of a handful of local developers that have been reasonably active in developing a few hundred units per year for decades in this riverfront city.
At present, CBRE is tracking 30 developments in the Louisville metro area that are either under construction, in lease-up or in the early stages of planning. Those still in planning stages account for nearly half of the 6,700 units in the three- to four-year development pipeline. While several of these developments may never come to fruition, the flurry of activity clearly indicates developers have taken notice of Louisville’s supply and demand imbalance and attractive fundamentals. Of the 30 developments in the pipeline, out-of-state developers control 17 with Louisville natives controlling the balance.
Investment Sales
Investor demand for Louisville multifamily properties has intensified over the last several years with bidding coming from REITs, institutions and private capital sources. The reason why investor demand is plentiful is because the market has been supply-constrained over the past 15 years, it has topographical and geological constraints on both single-family and multifamily and it is less expensive than Nashville. And with Louisville’s diverse and growing employment base, it is a surprising money center.
Passco Cos., an Irvine, Calif.-based private fund investor, recently acquired Veranda at Norton Commons, a stick-built product within a high-end master-planned community in Prospect. At $213,000 per unit, the transaction was a record price for all of the Louisville MSA. Tennessee-based Bristol Development developed the asset in 2015.
Other quiet transactions have occurred at pricing levels that 12 to 18 months ago would have been off-the-chart records.
Year-to-date 2016 sales volume stands at $212 million and is expected to reach $340 million by year-end, which is up from approximately $329 million in 2015. As Louisville continues to flourish and attract additional businesses, creating job growth, we expect economic stability across all sectors, especially multifamily.
— By Steve LaMotte Jr., CCIM, Senior Vice President and Dane Wilson, First Vice President, CBRE | Central Midwest. This article originally appeared in the September issue of Southeast Real Estate Business.