Following the trends of both regional and national multifamily statistics, the Louisville metro area has had a robust stretch of development, repositioning and innovation in the multifamily housing sector that has surpassed 10 years in duration. With a population of 1.32 million, there are 516,000 households in Louisville with an average household income of $69,000.
Pursuant to a recent CoStar Group report, Louisville has a total inventory of just over 84,000 units. It is anticipated that there will be over 91,000 units by 2026, a 8.3 percent increase. CoStar also forecasts that the Derby City’s vacancy rate will hover around 5.5 percent in 2026.
One of the projects under development includes The Reserve (the Stable) at English Station. The 172-unit, Class A community adjoins a patio home development that was developed by Sunshine Industries. The property is slated for completion in January 2023.
Gant Hill, Gant Hill & Associates Inc.
As far as popular neighborhoods for development, there are several recently developed or under construction projects in the city’s East End district.
The city’s economy has benefited from the accelerated adoption of e-commerce as a result of the pandemic. Retailers and logistics providers are leasing a record amount of space as they seek to expand their distribution networks.
Louisville offers logistics tenants a central location, mild climate, three riverports, multiple rail lines and eight regional airports. Louisville Muhammad Ali International Airport alone handles 6 billion pounds of air cargo annually, largely due to UPS’ International Next Day Air Hub that employs 25,000 people locally.
Healthcare is another noteworthy industry with an estimated $80 billion in revenue and 40,000 local employees.
These economic engines fuel growth for Louisville as a diverse community with individuals of many different talents and educational backgrounds, and it also provides a stable middle class.
As a result of the solid economic environment and workforce, the prevailing 12-month average cap rates for multifamily transactions have averaged 5.1 percent. Average per door prices are approximately $147,000, with average asking rents of approximately $1,080 per month.
Recent deals over the past 12 months include CF Capital acquiring 887 units across Kentucky and Indiana. These properties are existing communities that are repositioned and rebranded. Improvements include renovations to exteriors, added amenities, overhauled landscaping and new parking and roofs. The investor has renovated 30 percent of the units so far in the portfolio. CF Capital bought Paddocks at Ridge Park last September. After renovating the units, the firm is re-leasing at 25 to 30 percent increase in rents.
With vacancy averaging 5.4 percent, rent growth grew 8.5 percent from 2021 to 2022. It is anticipated that rent growth will stabilize at an annualized growth rate of 4.5 percent moving forward.
Another recent sale is The Ivy, which comprises 274 apartments and is located off of Old Henry Road near I-265 in East Louisville. With a variety of luxury one-, two- and three-bedroom apartments, The Ivy provides residents with luxurious lifestyle amenities, including a heated pool, Peloton bike room, golf simulator and community chef’s kitchen. The community sold in May for over $100 million, which represents $336,995 per door, one of the city’s most expensive multifamily deals.
In closing, with a relatively low cost of living, a stable employment outlook and modest rent and inventory growth, Louisville is a stable and dependable market to make an investment in multifamily real estate.
— By Gant Hill, President and Principal Broker of Gant Hill & Associates Inc. This article was originally published in the September 2022 issue of Southeast Real Estate Business.