Q4 2022 Office Space Report: Louisville, KY
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Louisville is renowned for its bourbon culture, horse race events at Churchill Downs, and outdoor recreation opportunities. It’s also home to Fortune 500 companies such as Brown-Forman, Yum! Brands, and Humana.
The unemployment rate in Louisville didn’t change in Q4 compared to Q3, remaining at 2.7%.
Population growth in the metro area recorded 9,000 new residents, increasing by 0.81% from 2021 to 2022.
Louisville’s office space saw vacancy increase, rents decrease, and negative absorption in the fourth quarter.
General Area Overview & Demographics
Louisville is Kentucky’s largest city. Its population is 628,594 people, making it the 28th most populous city in the United States. The racial makeup of Louisville is 64.3% White, 28.6% African American, 1.9% Asian, 3.5% Hispanic or Latino, and 1.7% other ethnicities.
Louisville, KY Median Household Income & Population
The median household income in Louisville is $49,220. This is slightly below the national average of $57,652. The poverty rate in Louisville is 16.7%, marginally higher than the national average of 14.6%.
According to the US Census Bureau, the median age is 34.3. The city is home to a diverse population of all ages, with 24.4% aged 18-34, 37.2% between 35-54, 20.1% between 55-74, and 18.3% over 74.
The University of Louisville, Bellarmine University, and Spalding University are major universities in Louisville. The University of Louisville is the largest public university in the state, with over 21,000 students.
One of the most iconic landmarks in the city is Churchill Downs, home to legendary horse racing events such as the Kentucky Derby and Kentucky Oaks. The on-site museum offers visitors a look into the venue’s history.
Louisville experiences hot summers and cool winters. July is the hottest month, with an average high temperature of 86°F. The coldest month is January, with an average low of 28°F.
Summary of Louisville Office Space Performance in Q4 2022
The vacancy rate for Louisville office space was 15.5% in Q4 2022.
CBD recorded a vacancy of 18.5%, while the suburban market averaged 13.2%. That said, Plainview/Middletown, within the suburban market, posted the highest office vacancy of 22.8%.
Northeast had a vacancy of 1.3%, the lowest of Louisville’s submarkets in Q4.
Overall absorption was negative in the fourth quarter (-81,000 square feet) and for the year (-222,000 square feet.)
CBD provided most of that loss, with a quarterly absorption of -63,000 and an annual -209,000.
Plainview/Middletown, South, and Northeast were the only submarkets with positive absorption in Q4 2022. They also totaled positive for 2022.
What are office space rents like in Louisville?
Louisville’s office space rents averaged an asking price of $18.54 per square foot. This is a decline when compared to Q3’s rent of $18.70.
The Hurstbourne/Eastpoint submarket had the highest asking rent at $21.26, the only submarket to average over $20 per square foot across all office space categories in Louisville.
Southeast’s rent was the lowest at $15.78.
Class A rents averaged $20.21 per square foot. Hurstbourne/Eastpoint was the highest ($22.09), and South Central was the lowest ($17.51) for Class A space.
Purchase & Leasing Activity
The largest sale for Louisville office space was Matrix Holdings’ purchase of 94,000 square feet for $70.44 per square foot, totaling $16.8 million.
Q4 saw 67,000 square feet of leasing activity in the CBD, bringing the annual total of 2022 to 178,000.
Suburban leasing activity reached 106,000 square feet in the fourth quarter, totaling 641,000 for 2022.
Notable Office Space Deals in Louisville in Q4 2022
There were several deals that took place for Louisville’s office space in Q4 2022.
- Sazerac Company purchased 91,000 square feet for $14 million.
- Mountjoy Chilton Medley leased 34,000 square feet.
- Assured Partners leased 27,600 square feet.
- Greater Louisville leased 17,000 square feet.
These are select examples among other activity.
New Office Space Development Activity in Louisville in Q4 2022
There were no new deliveries for Louisville office space in the fourth quarter of 2022.
At the close of 2022, there were 121,000 square feet of new office space under construction. Hurstborne/Eastpoint accounts for all of that activity.
Class A comprised 73,000 square feet of this pipeline, while Class B provided 48,000.
Market Forecast for Louisville’s Office Space Market
Louisville’s office space market is still suffering from the effects of COVID-19. Remote work practices in the city remain strong and continue to make a return-to-office more difficult for Louisville employers.
The flight-to-quality trend across the nation will continue in Louisville, as Class A properties saw a rise in average rental rates.
Office space is forecasted to remain an underperformer for Louisville throughout 2023.
Takeaways for Office Space Investors
The demand for office space was weak in Q4 2022, with no indicators of a turnaround.
Investors should consider looking at other locations for smarter investments.
Do your research, stay diligent, and happy investing.
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