New Multifamily Properties, Redevelopments Popping Up Around Metro Louisville
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, have also been active in bringing new Class A properties to the market.
Bristol, Cityscape, NTS and Hagan are under construction on large Class A properties in the eastern quadrant of Louisville. Denton Floyd and LDG Development are finishing construction of the Villas of Jeffersonville, which is located by the River Ridge Industrial Park in Jeffersonville, Indiana. River Ridge is a 6,000-acre new business park on the other side of the Ohio River that has been highly successful in attracting large corporate tenants adding new employment growth to southern Indiana.
Louisville has seen a number of older communities that were originally built during the 1970s through the 1990s that owners are redeveloping into more high-end communities. Investors are revitalizing the clubhouses and adding amenities and high-end finishes at these properties to attract higher rents. This program has been very successful in Louisville, and there are a number of apartment communities where the rents have increased more than 35 percent from the pre-renovated product.
The Marian Group was highly successful in developing the Bradford Mills Lofts in Louisville’s Germantown neighborhood. Marian took an eyesore industrial building and created a highly amenitized loft development. Developers are currently redeveloping two industrial properties into residential communities in the near eastern urban corridor of Louisville. The central business district (CBD) has seen delivery of The Residences of Omni, which is currently achieving the highest rent in the market. The high-rise development spans 224 units.
Cityscape and Bristol have stabilized their developments in the heart of the NuLu/Butchertown submarket, which is the premier near-urban neighborhood that has attracted high-end restaurants, shopping and residential. The Butchertown neighborhood is growing with renovation of older industrial properties, as well as new construction that will only be enhanced by the proximity of the large-scale Louisville City FC soccer stadium coming on line.
Multifamily developers have also been attracted to the southern and western portions of the Louisville metro area, which have more of a workforce housing rental scale. Cityscape’s Apex on Preston development set the high-water mark for the area and has continued to find success by providing Class A product with high-end amenities for the residents of southern Jefferson County. Most of the newer products in this area, however, have been more value-oriented to draw the large manufacturing and distribution base of employees.
Louisville has also been successful in attracting out of state capital for investing in our multifamily communities. When product does come available in Louisville, the marketing process is generally bringing between 15 and 20 offers. This interest generates a very competitive bidding process for apartment communities, thus providing sellers with appealing alternatives if they choose to exit their investment.
Investors historically have been drawn to Louisville due to its “steady Eddie” economy. Louisville has had success in growing a very diversified economy without having any risk tied to one particular industry, therefore attracting out of state investment capital to Louisville for the availability of reliable returns and historic rental growth.
We believe multifamily developers — be they local, regional or national — will continue to be attracted to Louisville’s stable and growing economy, providing new product for the foreseeable future.
— By Craig Collins, Senior Director at Cushman & Wakefield | Commercial Kentucky. This article originally appeared in the September 2019 issue of Southeast Real Estate Business.