Growth in the suburban Louisville, Kentucky, office market will be driven by larger build-to-suit requirements addressing business expansion and/or consolidation. “Product likely will be large footprint, low rise, heavily parked with interstate access,” say Phil Scherer, president, and Jamie Schaefer, director of research and marketing, with Grubb & Ellis|Commercial Kentucky Inc. in Louisville. “Traditional office space will experience modest absorption, at best, as tenants merely trade places, suggesting limited speculative construction.”

The overall average asking rent for Class A office space is $18.63 per square foot; the overall vacancy rate is 21 percent.

More than $400 million in new construction in the downtown market will add measurably to the vitality of the central business district. Projects include a Marriott convention hotel; a Marriott extended-stay hotel; Fourth Street Live!, an urban entertainment complex; and a multitude of market-rate housing projects featuring condos and rental units.

“The majority of retail and office development will occur in Louisville’s upscale and more affluent east end, largely because of the availability of land and infrastructure improvements and the relative ease of developing ‘greenfield’ sites with abundant parking ratios,” say Scherer and Schaefer. “The CBD will experience little new office construction as the market struggles to backfill the more than 200,000 square feet to be vacated by Brown & Williamson as a result of the merger with RJR and subsequent consolidation in Winston-Salem, North Carolina.”

Several major suburban requirements are creating interest at this time, including a 175,000-square-foot build-to-suit requirement announced by Citigroup Inc. Citicorp Credit Services, a Citigroup subsidiary, acquired Sears Roebuck and Company’s credit card division and is considering a proposal to expand the company’s local credit card operations, creating 1,620 new jobs.

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