With strong industrial leasing activity and significant development over recent years and currently, notably in the electric vehicle (EV) market, Louisville’s industrial real estate market maintains a steady drumbeat and forecasts continued success.
The Louisville industrial market’s strong start to the year continued in the second quarter, and the JLL Q2 Industrial Insights report shows that Louisville remains a robust market. Over the past five years, developers constructed over 25 million square feet of Class A industrial space, positively absorbed 27 million square feet and has grown Louisville to a 90 million-square-foot Class A industrial market.
Another positive market indicator is rental rates have appreciated 40 percent over the last three years, with the direct average asking rate currently at $5.67 per square foot. We expect this to continue to rise slowly over the next 18 months due to leasing activity, low inventory and a slowdown in speculative development.
Louisville is quickly integrating and expanding capacity for EV production, following a growing EV industrial trend across the United States. We expect the EV market to continue expanding, especially with Ford Motor’s commitment to the region and generating an EV presence at the Blue Oval City SK facility.
A joint venture with SK On, an energy company specializing in battery technologies, Blue Oval is a $5.8 billion investment in Glendale, Ky., about 50 miles south of Louisville. The twin battery manufacturing facilities will support the future of Ford’s EV lineup as the company evolves its products to meet demand for EVs. This is one of most notable confirmed projects, attracting manufacturers across industries to gravitate toward the region.
The Blue Oval facilities span 1,500 acres, and it is forecasted that its operations will occupy 3 million square feet of industrial and manufacturing space to generate 5,000 jobs within the region. Project construction is underway and expected to be complete for internal testing and production next year, with mass market production in 2025.
As production commences and the facility expands, it is likely that suppliers and ancillary operations will expand north toward Louisville, generating an even greater economic impact for the metropolitan area.
In addition to Blue Oval, Ford continues to display its commitment to the region with a $700 million investment in Ford’s Kentucky Truck Plant.
Demand will maintain its current pace throughout the remainder of 2023, and year-end net absorption will likely exceed 6 million square feet. Moving into 2024, we expect new construction to remain slow due to rising interest rates, a softening capital markets environment and a more challenging debt environment.
Louisville’s tightening core market has pushed active developers to expand their search for developable land to surrounding counties and further from I-65, exploring markets beyond traditional locations.
Even still, due to geographic location and access to UPS Worldport’s infrastructure, Louisville maintains its position as a logistics hub for many industries, including technology, e-commerce and pharmaceutical/healthcare. All signs point to the region continuing its industrial momentum, as it remains strong on the heels of the EV market activity and continued strength in core competencies.
As a geographical hub for logistics and freight with a strong labor force, Louisville is a market to watch across the U.S. heartland for its industrial strength.
— By Matt Hartlage, Senior Managing Director, JLL. This article was originally published in the September 2023 issue of Southeast Real Estate Business.