Louisville’s industrial market continues to impress as it has successfully navigated recessionary times to the now current brisk market with solid activity. Even within those leaner times of 2009 and 2010, Louisville grew its occupied footprint by approximately 1.6 million square feet with perhaps a recipe that includes its beneficial geographic location and infrastructure, diverse manufacturing and logistics economy buffeted by UPS Worldport and Supply Chain Logistics, and aggressive state incentives provided by Kentucky and adjacent neighbor Indiana.
The I-65 corridor is currently, and has been, white hot over the last 15 years. Louisville, like many similarly sized cities with populations over 1 million, has developed to its outer edges and industrial development is now spilling into smaller adjacent communities such as Shepherdsvillle, Ky., and Jeffersonville, Ind., both of which no longer resemble their former industrial selves.
Steve Gray, Commercial Kentucky | Cushman & Wakefield
National and international developers like Prologis, USAA, Dermody, Exeter, DCT, Pinchal and Welsh, along with local developers such as Main Street Realty, Capstone, America Place and Crossdock, have found these communities and the I-65 corridor not only ripe with opportunity, but flush with tenants.
On the Louisville side of the Ohio River, current speculative construction along the corridor includes more than 1.4 million square feet of spec space in three buildings. In Southern Indiana, Jeffersonville’s River Ridge Commerce Center currently has more than 1.5 million square feet of spec construction in four buildings and some 600,000 square feet of build-to-suit projects in three buildings.
Through June, Louisville’s year-to-date leasing activity is 2.7 million square feet, which represents an increase of 40 percent from 2014. Making moves both within the area and into the area are companies such as Fisher Paykel, Coca-Cola, Performance Food Group, Bose, Hanna Andersson, Saddle Creek and Grupo Antolin. The market provides strategic placement for those companies not only serving the local and regional markets, but also the eastern U.S. and, in a few cases, the nation. Industrial inventory for the Louisville market currently stands at 130 million square feet. Annually, market absorption is positive and typically within the 2 to 3 million-square-foot range.
Louisville’s list of developers and investors continues to grow. Many find success here following the path of not only logistics networks, but also the path of least resistance related to cap rates and their relative compression in larger markets. Joining the ranks of those already mentioned are new investors to the area such as UBS Realty Advisors (recently acquiring more than 500,000 square feet), Stolz Management Corp. (purchasing 325,000 square feet) and One Liberty (purchasing 125,000 square feet). Other acquirers of late include International Airport Centers, Indcor, Becknell and Sparrowhawk.
Investors find great appreciation for Louisville’s steady growth history, Kentucky and Indiana incentives that lure tenants to the region, as well as the ease of travel within the area given multiple north/south, and east/west interstates such as I-65, I-71, I-64, I-264 and I-265 that surround and service the region. In addition, two new Ohio River bridge projects, with completion set for 2016, will further spur development and increase logistic efficiency on both sides of the river.
Louisville also offers investors a strong manufacturing base with two Ford Automotive Plants producing Super Duty trucks like the Expedition, Navigator, and the Escape; General Electric’s Appliance Park; a bourbon distillery industry enjoying unprecedented growth; and many manufacturers in machining, engineering and chemical production. Vacancy in the area continues to be low hovering around 5 percent. The market is experiencing its first landlord’s market since the late 1990s and rental rates are generally on the increase.
As with the national economy, our long-term outlook in Louisville is strong, our overall unemployment rate is below 5 percent, and our exports are on the increase. The global growth of e-commerce and online retailing continues to impact the supply chain fueling the need for industrial development ,which features well-located Class A buildings, access to efficient transportation adjacent to UPS and FedEx and state-incentives that welcome growth and development.
— By Steve Gray, Senior Industrial Real Estate Advisor, Commercial Kentucky | Cushman & Wakefield. The article was originally published in the September 2015 issue of Southeast Real Estate Business.