The suburban Louisville office market is currently experiencing slow absorption and a rise in vacancy. With 650,000 square feet of new construction delivered to the market during the second half of 2001 and only 120,000 square feet of positive absorption, the suburban vacancy rate increased to 20 percent. "Due to weak tenant demand, developers are not building new speculative office space until economic conditions improve," says John MacLeod, SIOR, with Harry K. Moore Company Colliers in Louisville, Kentucky.

Despite the lackluster circumstances, leases are being signed and developments are still being built. Several leases have been recently signed in the suburbs. First Residential Mortgage Network signed a 30,000-square-foot lease in the new Hurstbourne Corporate Plaza. General Electric signed a lease for 100,000 square feet at Hurstbourne Forum III and IV. At The Columns at Hurstbourne Green, MedAssist signed a 30,000-square-foot lease. PaineWebber and McCann Erickson each took 20,000 square feet at Olympia Park Plaza and One Course Place, respectively. Also in Olympia Park Plaza, Fenley Real Estate Group recently signed a 56,000-square-foot lease with ADP. Some central business district (CBD) tenants, including PaineWebber, Hilliard Lyons and Farm Credit Services, have moved all or portions of company operations to the suburbs. One significant CBD lease is the 90,000-square-foot space that Greenebaum, Doll & McDonald recently renewed in the National City Tower. Currently, Class A rental rates range from $17.50 to $24 per square foot in the CBD and $17 to $23 in the suburbs.

The vast majority of new office development is occurring in the eastern part of Jefferson County in the 200-acre Hurstbourne Green office park and along Interstate 265, Louisville' outer beltway. "Hurstbourne Green is adjacent to a significant portion of the existing suburban office market and features ample green space and proximity to many upscale neighborhoods," MacLeod notes. "The recent development along I-265 is the result of a lack of available land for new office parks inside the I-265 beltway."

Also in eastern Jefferson County, Faulkner Hinton & Associates will soon begin construction on a 40,000-square-foot office and retail complex. The development will feature retailers on the first floor, office space on the second floor, two restaurant pads and two outparcels for banks.

Fenley Real Estate Group also recently developed a 120,000-square-foot building in Olympia Park Plaza, the first phase of a 30-acre office and hotel development located in the Brownsboro/ Springhurst submarket.

Faulkner Hinton & Associates will soon be underway with Central Station, a mixed-use development near the Louisville International Airport. Located in the economic heart of Louisville, Central Station will feature hotels, retail and office/flex space on 22 acres, according to Mark Hinton, who handles commercial leasing and sales for Faulkner Hinton & Associates.

In Forest Green Corporate Office Park, a development in the Hurstbourne/Eastpoint submarket, Faulkner Hinton & Associates recently developed the 150,000-square-foot Ormsby Two building. In the same submarket, Fenley Real Estate Group has completed One Triton Office Park, a 103,000-square-foot facility in Eastpoint Business Center. The new building is the first of three buildings planned for Triton Office Park at Eastpoint Business Center.

"The Hurstbourne/Eastpoint submarket is the area to watch out for," MacLeod states. "This area has seen the worst of the negative absorption that has occurred during the recession and two-thirds of the office market' new construction completions during the last half of 2001. The vacancy rate for this submarket is 29.7 percent. While the absorption trends have turned positive in recent months, significant uncertainty remains in this area. High Speed Access, a 90,000-square-foot tenant in this submarket, has sold its assets to Charter Communications and, although preliminary indications appear that Charter will maintain a significant Louisville office, much uncertainty remains."


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