SOUTHEAST SNAPSHOT, APRIL 2009

Louisville Office Market

Carl K. Ray, Jr., principal broker of Louisville-based Ray & Associates, sees the Louisville office market as a mirror to the national economy. Markets throughout the United States are experiencing slowdowns — some markets are more affected than others, of course, but nearly everybody’s feeling the pinch. New construction is at a standstill, and only a small number of developments are still underway. Transactions have been on the decline, and tenants don’t know if they should take advantage of increased concessions by landlords, stay put or look for a cheaper market.

“Anything new has been put on hold. If it wasn’t coming out of the ground a year ago, it’s not going to come out of the ground now,” Ray says.

Louisville is a healthcare city, and downtown office space is populated by medical suppliers and the insurance industry. The insurance company Humana is one of the largest tenants, and every move the company makes has an impact on the office market. “We feel the effects a lot,” says Michael E. Norris of Ray & Associates. “When they expand, that’s good news for downtown office space, and when they have cuts, that influences it as well.” Recently, the healthcare industry has been expanding. In fact, it’s one of the very few bright spots in this dark economy. This, Ray says, is good news for the downtown office market. “In the next year, the only thing I can see working well here is the healthcare industry,” Ray says. 

In Louisville, brokers started seeing the effects of the recession last summer. Tenants who had been searching for new space started rethinking.  Next, developments that had been in the pipeline for a number of months came screeching to a halt. “A lot of tenants and developers started getting wary about looking into other projects,” Ray says. “Tenants are looking; they’re not doing anything. Everyone’s trying to figure out what’s going on.”

For now, the office market in Louisville is barely moving. Just like brokers, tenants, developers and investors all across the country, everyone’s looking to someone else for guidance. “Everything is on hold here, and no one wants to be that first mover,” Norris says. “They want to see what happens to their competition.”

— Jon Ross

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