Q3 2022 Multifamily Real Estate Report: Louisville, KY
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Home to the Kentucky Derby and the world’s great bourbons, Louisville is the largest city in Kentucky.
Q3 of 2022 ended strong for its labor market, settling at an unemployment rate of 2.7%.
The larger metro area has averaged a population growth of 0.8% from 2019-2022.
With record low unemployment and stable population growth, Louisville and its surrounding submarkets provide solid foundations for a healthy multifamily market.
General Area Overview & Demographics
Louisville, Kentucky, is located in the north-central part of the state. It houses a diverse population of over 600,000 residents. The majority of Louisville’s population is White (62.3%), followed by African American (23.6%), Hispanic or Latino (7.4%), Asian (4.9%), and other (1.8%).
Its population comprises 25.5% aged between 0 and 17, 29.7% aged 18 to 34, 27.6% aged 35 to 64, and 17.1% aged 65 and over.
According to data from the U.S. Census Bureau, the median household income in Louisville is $48,566. This is slightly below the national median of $50,221 for a similar-sized city. The poverty rate for Louisville stands at 19.4%, which is higher than the state and national average.
The city is home to the Muhammad Ali Center, Churchill Downs racetrack, and the Louisville Slugger Museum & Factory. The city hosts year-round festivals and events, such as the famous Kentucky Derby Festival and Forecastle Music Festival.
Louisville has several higher education institutions, including the University of Louisville, Spalding University, and Jefferson Community & Technical College. The University of Louisville is a nationally ranked public research university with an enrollment of nearly 22,000 students.
Summers are hot and humid, with temperatures averaging between 77 and 90°F. Winters are mild and typically experience temperatures of 35 and 50°F. Louisville is known to experience occasional snowfall in the winter, although snow accumulation is usually minimal.
Summary of Louisville Multifamily Real Estate Performance in Q3 2022
Louisville’s multifamily market has experienced steadily declining vacancies since Q1 2022.
The third quarter of 2022 saw vacancies fall to 5.7%, a 0.1% decrease from the second quarter. Overall vacancy, however, was still higher than the national average.
While absorption was positive at around 120 units, it was well below Q2’s 320 units and Q1’s near 600 units.
What are multifamily rents like in Louisville?
The average asking rent for Louisville multifamily decreased from $1,084 per month in Q2 2022 to approximately $1,080 per month in Q3 2022. This slight drop was anticipated as multifamily rents across the country start to slide down from historic highs back to seasonal averages. Yet, a significant portion of Kentucky renters is struggling to keep up with their payments.
Across all submarkets, rents are averaging about $1.15 per square foot. In areas south of the Ohio River, like Lyndon and Crescent Hill, rents for Class A units are still increasing.
Downtown Louisville, however, remains one of the weakest performers for multifamily real estate in Louisville.
Purchase & Leasing Activity
Sales totaled almost $1.5 billion in 2022, an 81% rise over 2021.
Nearly half of that was generated in Q2 2022, with more than $600 million done in deals.
Over 2022, the average price per unit rose 15.8% to $147,000 per unit. The overwhelming majority of sales for multifamily real estate in Louisville was made by investors acquiring newly renovated properties with high occupancy.
Notable Multifamily Real Estate Deals in Louisville in Q3 2022
Claiborne Crossing was the highest sale for the year throughout Q3, selling at approximately $91 million for 183 units averaging $376,000 per unit.
New Multifamily Real Estate Development Activity in Louisville in Q3 2022
There were 3,260 units in the pipeline in Q3 2022, representing around 4% of total stock.
Most of that activity occurred in Southwest Louisville’s submarket, with 1,750 units constructed across seven properties.
By the end of 2022, Lakeside Gardens was anticipated to be completed and add 360 units to Louisville’s multifamily market.
Market Forecast for Louisville’s Multifamily Real Estate Market
Louisville’s multifamily market appears positive and stable yet vulnerable to weakening if its fundamentals don’t tighten into 2023. An influx of new multifamily supply could also dampen the market.
Its economy is headed upward, but its growth rate remains below the national average.
Due to slower population increases than in other urban areas across the nation and differences in industry composition, personal income gains are expected to remain lower compared with those in similar cities.
Takeaways for Multifamily Real Estate Investors
For an investor considering this market, acquiring an established property that’s well-leased and of higher quality provides the best potential for profitable returns.
Louisville has indicators it will remain a modestly positive market.
Stay diligent and invest wisely.
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