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FEATURE ARTICLE, DECEMBER 2004
2005 Outlook
LOUISVILLE, KENTUCKY
The Louisville office market is showing signs that a recovery,
although sluggish, may be underway with both leasing activity
and net absorption well ahead of last year’s pace. Suburban
vacancy rates continued to decline during the third quarter,
as net absorption outpaced new construction. The overall suburban
vacancy rate declined from 19.7 percent to 17.8 percent, while
the Class A vacancy rate declined from 22 percent to 20 percent.
Total suburban net absorption for the year reached 165,227
square feet and is expected to perhaps double by year-end.
Major suburban transactions included a 170,000-square-foot
build-to-suit for CitiCorp scheduled for completion during
the fourth quarter, and a 54,000-square-foot center developed
for National Patient Account Services also scheduled for completion
during the fourth quarter.
The central business district continues to suffer somewhat
from higher vacancy rates exacerbated by the recent merger
of Brown & Williamson Tobacco Corporation with RJR and
the subsequent consolidation in Winston-Salem, North Carolina.
More than 200,000 square feet of headquarters-quality office
space will be offered on a sublease basis throughout 2005,
increasing the already spirited competition for tenants among
other CBD Class A buildings. While job growth is the ultimate
elixir for reducing vacancy rates, employers are hiring, but
not vigorously, due to a variety of factors including healthcare
costs, corporate profits, and political concerns both locally
and abroad.
However, job growth should accelerate during 2005, especially
in the financial services and healthcare arenas, which should
bode well for the suburban office market where tenants can
secure large floor-plate facilities with abundant, free parking.
The strengthening demand, fueled by job growth, should reduce
vacancy rates throughout 2005, giving rise to new construction
starts and increased effective rental rates in the suburban
office market.
The Louisville industrial market continues to gain momentum
as evidenced by strong third quarter sales and leasing activity,
pushing the year-to-date figure to more than 4.6 million square
feet. Positive net absorption of 1.16 million square feet
resulted in a decline in the overall industrial vacancy rate
from 10.9 percent to 9.8 percent.
Much of the industrial absorption occurred in the warehouse/distribution
sector as Louisville continues to benefit from the expansion
of the UPS hub at the Louisville International Airport. The
Bullitt County submarket, located just south of the airport
along Interstate 65, continues to attract big box users such
as Global Sports Interactive. National developers, as well
as regional and local players, are assembling large industrial
tracts in Bullitt County to meet the growing demand for large-scale
distribution/ fulfillment centers near the UPS operations
hub. Accordingly, look for accelerated construction in 2005.
— Phillip Scherer, Grubb & Ellis|Commercial
Kentucky, Inc.
| Next year, Ray & Associates will continue
to make progress on Old Henry Crossing. Located in Louisville
at Interstate 265 and Old Henry Road Interchange, the
mixed-use development contains office and office/flex
space, office condominiums, patio homes and townhomes,
and restaurants. There will be a village center on the
120-acre development called Promenade at Old Henry.
All buildings in Old Henry Crossing will be architecturally
designed to include extensive landscaping and hardscaping.
The entrance will feature brick medians, custom street
signs and extensive landscaping of Old Henry Parkway.
Landscaped common areas, water features and wide sidewalks
throughout will make the development pedestrian friendly.
This is an upscale Class A development located in a high-income
demographic area. |
©2004 France Publications, Inc. Duplication
or reproduction of this article not permitted without authorization
from France Publications, Inc. For information on reprints
of this article contact Barbara
Sherer at (630) 554-6054.
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