Louisville’s office market is turning a page. If the first act of the market’s rightsizing was defined by COVID-era downsizing, where companies shed space as remote work took hold, the second act looks different and harder to sum up in a single storyline.
Today, several forces are pulling in different directions at once. Some companies are still reducing their footprints as leases renew. Others are expanding as employees return to the office and spend more days per week at their desks. Additionally, a wave of expiring pandemic-era leases is forcing tenants to make fresh decisions about how much space they need and where they want it. The result is a busy market moving in several directions simultaneously.
So what does a “right-sized” Louisville office look like in 2026?
Flight to quality continues
More than anything, tenants are still chasing quality. Well-located, highly amenitized buildings continue to win the deals, and there is now significantly fewer premium space available than there was a couple of years ago. Many tenants have already made that move as their leases have come up for renewal.
That demand is showing up in rents. The best-positioned buildings, with the right amenity mix in the right location, have seen rent appreciation of roughly 10 to 20 percent over the past few years. The gap is visible in today’s asking rates: Class A space in St. Matthews is asking $28.83 per square foot, with the I-71/Brownsboro Road corridor at $24.61 and Central Louisville at $23.97, all well above the $21.15 Class A average for the market.
In some cases, companies are going further and paying out of pocket for improvements above and beyond the landlord’s tenant improvement (TI) allowance. They’re absorbing the high cost of construction themselves in exchange for the nicer, perk-filled offices their employees now expect.
The flight to quality trend is also redrawing the map of where “office” happens. Neighborhoods like NuLu (an eastside neighborhood short for “New Louisville”) that are walkable and full of restaurants, bars, hotels and entertainment are emerging as genuine office submarkets. NuLu was never really thought of as an office market before, but its emphasis on mixed-use is now generating real office demand.
Suburban Louisville
The suburbs remain the steadier side of the market. Suburban vacancy sits at 19.6 percent overall, with Class A right below at 19.5 percent. These vacancy rates are not indicative of the overall market, though there are pockets where it runs higher, including the South submarket at 26.8 percent. However, the St. Matthews and the I-71/Brownsboro Road corridor submarkets are both under 10 percent. Suburban rents have held up, and Class B suburban space hit a record $18.52 per square foot in the second quarter.
What is notably absent here is new construction. With building costs where they are, delivering a new office is largely cost-prohibitive, and rents have not reached the levels that would justify it. Instead of building new, owners are buying and renovating.
One of the market’s larger landlords is renovating a multi-building suburban office complex adding new lobbies, landscaping, parking lots and exterior paint. Those upgrades are where much of the rent appreciation is concentrated.
There are early signs that could shift. At least one developer is contemplating a speculative start, a signal worth watching as demand tightens the supply of existing quality space.
Downtown Louisville
Downtown was hit harder by the pandemic than the rest of the market, and it still has the biggest holes to fill. Class A vacancy in the central business district (CBD) stands at 28.9 percent. However, there are signs that the trajectory is on the upswing. The submarket recorded more than 500,000 square feet of leasing last year as the value proposition that has always defined downtown remains intact. Even the lingering perception that downtown isn’t safe has been improving.
Much of the downtown story right now is conversion. Older office buildings are being repositioned, most visibly into hotels. However, not every deal has crossed the finish line. Some building sales have been delayed or fallen through, a fair illustration of how uneven this moment is. Downtown rents, meanwhile, are holding steady rather than climbing, with Class A asking rates at $19.57 per square foot, up $0.57 from the same time last year.
A final thread runs through both submarkets: some companies are simply buying their buildings outright, choosing to own and control the environment they want rather than lease it.
Outlook
Overall, we are very confident in the future of the Louisville office market. Activity is up with over 300,000 square feet of leasing in the third quarter thus far.
We’re seeing an increase in tenant demand as the flight to quality movement is very much alive. And with new construction largely on hold, owners are competing by reinvesting in the buildings they already have.
It’s an unusual moment for the market, but a healthy one. Louisville’s office market is rightsizing on its own terms, and the second act is off to a strong start.
— By Jeff Dreher, Senior Vice President, CBRE. This article was originally published in the September 2026 issue of Southeast Real Estate Business.