Much like the rest of the nation, both Louisville-area landlords and tenants are stalling while waiting for the ripple effects of the COVID-19 pandemic to become clear. The office market in Louisville has entered a holding pattern of sorts, while tenants evaluate their workspace needs in light of the major shift to remote work. Many are opting to wait and see what the market holds, a stark contrast to the steady development and leasing activity we saw in 2019. Now with investors taking a more long-term view of the market, larger portfolio sales are limited while everyone questions the future demand for office space. The most recent portfolio transfer was made by the New York-based Group RMC Corp. in its acquisition of a six-building, Class B office portfolio from locally based Ascent Properties for $44.5 million. The deal was traded at an 8.6 percent cap rate. However, don’t let the lull in activity fool you. The region’s office market is ripe with possibilities. While many local companies initially speculated about permanently adopting full-term remote work in the second quarter, they’re reconsidering as time goes on. Regional JLL research shows that 80 percent of businesses said most employees will eventually return …
Home of the Louisville Slugger and Muhammad Ali, sports is engrained in the identity of Louisville. Derby City continues to make a big push to bring in an NBA team, but a different professional team is already in town. Louisville City FC, also known as LouCity, is Louisville’s professional soccer team. The club is not only a two-time champion of the USL, the team is now in the process of building a new $65 million stadium with seating for more than 13,000 spectators. Dubbed Lynn Family Stadium, the new arena will be the centerpiece of a 40-acre, $200 million mixed-use development in Louisville’s Butchertown neighborhood. Construction of the stadium is on schedule and should open for the 2020 season. The stadium will have amazing views, including the skyline of downtown Louisville and the waterfront area overlooking the Ohio River. The project should spur other retail, housing and offices to be constructed to revitalize Butchertown. Additional sports/entertainment is moving into Louisville’s malls as anchors. The vacant Sears location at Oxmoor Mall in the St. Matthews area will have Topgolf as a new anchor tenant. Topgolf has been working to come to Louisville for 18 months and was recently granted the approvals …
Louisville continues high occupancy levels throughout the metropolitan area in all apartment types as the market continues to enjoy record-level rent growth and new development. This is enhanced by low unemployment and rising wages throughout the Louisville metropolitan area. The diverse local economy from worldwide distribution at UPS and high-tech manufacturing at Ford Motor Co. and General Electric Appliance Park, as well as innovation in the medical industry, continue to provide high-paying jobs and a highly desirable employment base that can drive occupancy and rents for apartment owners in the Louisville metropolitan area. Integra Realty Resources reports an overall occupancy level of 96 percent for the Louisville metropolitan area, which has seen mid- to high-single-digit rent growth on an annual basis over the last three years. This high occupancy level and rental growth rate have attracted a number of new developments around the metropolitan marketplace. In 2018, there were 2,173 units completed and an additional 898 have been delivered in 2019 as of this writing. Most of the larger scale developments have been completed by regional developers such as Nashville-based Bristol Development and Indianapolis-based Cityscape Residential. Local development companies, such as Denton Floyd, LDG Development, Hagan Development and NTS Development, …
In 2018, Louisville saw a record year with more than 10 million square feet of net absorption in its industrial sector. This is a huge absorption number for any of the Midwest markets and represents more than three times Louisville’s previous record. Louisville was second only behind Chicago out of the Midwest markets tracked by CBRE. The absorption follows a record year for speculative construction as well, as close to 4 million square feet was delivered in 2018. User demand came from all sectors, including automotive, e-commerce, third-party logistics firms (3PLs), manufacturing and medical. Automotive and manufacturing were particularly strong performers. The more notable automotive and manufacturing transactions in 2018 were three Ford Motor Co. leases totaling more than 1 million square feet, as well as New Flyer’s 315,000-square-foot, $30 million transit bus and motorcoach parts fabrication facility in Bullitt County. Additionally, Denso leased 311,000 square feet in Southern Indiana and KCC opened another 224,000-square-foot plant to expand production capacity of its HVAC equipment line. Distribution remains strong in Louisville due to its central location and available workforce. According to a recent report from CBRE’s Labor Analytics Group, Louisville has the highest distribution labor score among the Midwest markets. As …
Strong market performance has allowed the Louisville industrial market to recently post the highest quarter of positive net absorption in market history during the second quarter of 2018, which occurred on the heels of the second-highest quarter of positive net absorption recorded just one quarter earlier. This outcome has been the result of recent build-to-suit projects, the availability of quality product and growing demand by new and prospective tenants in the Louisville market. Beyond healthy supply and demand fundamentals, Louisville is achieving great balance with access to available labor along with low utility costs. Tenant Demand Picks Up There are currently over 20 active prospects considering 200,000 square feet or larger in the metro Louisville market. Much of this demand is attributed to the high level of activity at the two local Ford Motor Co. plants, as well as the proximity of the UPS Worldport, the 5.2 million-square-foot-core of UPS’s global air network located in the heart of metro Louisville. Along with the natural interest from companies in the automotive supply chain and e-commerce companies benefiting from the proximity to UPS, we have recently seen an increase in pharmaceutical and food-related companies considering Louisville for a location. Strong Labor Force …
The face of Louisville is changing rapidly, but it has leveraged what the state of Kentucky is historically known for best, bourbon. Louisville is a short drive from most of the legendary distilleries in the Commonwealth. However, the downtown Urban Bourbon Trail is booming with tourism and many brands actually distilling their spirits onsite. Jim Beam’s Urban Stillhouse, the Evan Williams Bourbon Experience, Copper & Kings, Angel’s Envy Distillery and Rabbit Hole Distillery are locations where patrons can sample and buy their drink of choice and learn about the history of these companies and the evolution of the industry as a whole. Most recently in June, Brown-Forman Corp. opened its Old Forester Distilling Co. experience at the newly restored Whiskey Row on Main Street. The company is not only distilling and sharing its history at the site, but like others on the Urban Bourbon Trail there are areas to host receptions and parties. Duluth Trading opened next door on Whiskey Row late last year to begin to fill a growing need for retail space downtown. Convention Center, Hotels After two years being closed, earlier this month Louisville celebrated the reopening of the $207 million renovation and reconstruction of the Kentucky …
For the remainder of 2018, positive demand drivers will alter new apartment supply’s impact on operations in Louisville. The metro has had a large volume of new apartments to open this business cycle. Since 2013, an annual average of 1,500 units has been completed, totaling approximately 7,400 apartment units. As this new supply entered the market, initially strong leasing helped push vacancy down 100 basis points to 4.6 percent at the end of 2016. However, absorption of apartments softened last year as new units continued to open, lifting vacancy back up 90 basis points to 5.6 percent. This year, approximately 2,800 apartment units will be completed, further testing demand for luxury rentals in Louisville. A team of factors should fuel positive absorption, preventing an alarming uptick and keeping the vacancy rate in the mid-5 percent range. Payroll expansions by tech firms, manufacturing companies and hospitals will support consistent year-over-year hiring and income growth this year. Sub-4 percent unemployment suggests employers will recruit from outside the market to fill open positions or hire recent graduates from the University of Louisville and other local colleges. These job gains should increase the rate of household formations and bolster the market’s millennial base, an …
Louisville’s office landscape can be described as a tale of two distinct submarkets woven together by a common thread of consistency. In the central business district (CBD), Class A vacancy rate stands at approximately 13 percent while the suburban Class A vacancy rate hovers around 8.5 percent. As can be noted, there is a substantial gap in occupancy between the two submarkets — 450 basis points. The thread of consistency in the Louisville office market lies in the fact that both are within 100 basis points of those vacancy rates for the same quarter of last year. The suburban office market continues to see healthy rental rate increases driven by the low rate of delivery for new product, coupled with consistently lower vacancy rates. Newer projects are advertising rates in the range of $24 to $28 per square foot, while second-generation, Class A product has quoted rates in the high teens and low 20s. Many companies such as Thornton Oil, BrightSpring Health Services (formerly ResCare) and V-Soft have chosen to grow their headquarters presence in Louisville, which is helping maintain stability in the suburban market. As in most markets, Class B and C product continues to struggle as functional obsolescence, …
Louisville has a lot going for it when it comes to logistics. In addition to its prime location on the Ohio River, the city benefits from three major interstates running through it: Interstates 64, 65 and 71. I-65 is considered a Tier 1 Corridor due to the high volume of trucks that travel over this route, connecting Chicago and Indianapolis through Louisville to the Southern states. Louisville’s location also allows companies to reach 60 percent of the country’s population within a 12-hour drive. Perhaps most importantly, Louisville is home to UPS Worldport, the largest automated package handling facility in the world, and the center point of UPS’s worldwide air network. More than 300 flights arrive and depart daily, and the hub processes roughly two million packages a day and more than 4 million during peak holiday shipping season. E-commerce lives here and UPS offers customers the ability to drop shipments at Worldport much later in the day, compared to other cities, while still providing next morning/day delivery. Louisville is not only a great logistics hub, it has a strong manufacturing base. Louisville is home to GE Appliance Park and two Ford Plants: Louisville Assembly Plant and Kentucky Truck Plant. Louisville …
Sometimes there are benefits to being late to the party. Louisville, having lagged behind larger surrounding cities in multifamily development post-recession, is now experiencing a boom in apartment construction, much of which is being supplied by out-of-state developers. For similar reasons, including Louisville’s sustained economic growth fueled by continued strength as an international distribution center alongside a stable manufacturing base, national investor demand for Louisville multifamily properties has intensified. Traditionally known for the Kentucky Derby and the bourbon industry, Louisville is now raising eyebrows with a growing population, robust job growth and balanced multifamily supply and demand. Big Business, Jobs At the heart of this burgeoning story is UPS Worldport, the primary global air hub for the world’s largest package delivery company. UPS, the largest private employer in Kentucky, continues to expand its presence in Louisville, having recently announced a $310 million expansion of its Centennial hub sorting facility. Ford Motor also recently announced that it is investing $900 million in its Kentucky Truck Plant, in addition to the $1.3 billion and 2,000 jobs created at that plant in late 2015 to build Ford Super Duty trucks. Additionally, Qingdao Haier Co., having acquired Louisville-based GE Appliances in June 2016, announced …