CUSHMAN & WAKEFIELD | COMMERCIAL KENTUCKY LOUISVILLE ... · Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop,

MARKET INSIGHTLOUISVILLE, KENTUCKY MULTIFAMILY REPORT | FIRST QUARTER 2019

CUSHMAN & WAKEFIELD | COMMERCIAL KENTUCKY LOUISVILLE MULTIFAMILY RESEARCH

The Cushman & Wakefield | Commercial Kentucky Multifamily Research Team, along with Integra Realty Research, provides in-depth coverage of the Louisville Metropolitan Statistical Area. In addition to analyzing multifamily rent and sale trends, these reports examine employment data, key economic announcements, and development pipeline news.

RESEARCH & SALES TEAM

IN THIS EDITION

CRAIG COLLINSSENIOR [email protected]

MIKE KEMETHERVICE CHAIR, MULTIFAMILY ADVISORY [email protected]

1LOUI SVI L L E , KEN T UCKYMARKET INSIGHTFirst Quarter 2019

The following are select announcements from first quarter 2019:

Average Q1 employment decreased by 4,100 jobs.

Average Q1 unemployment decreased to 3.8%.

-4.1 -130% Y O Y B P S Y O Y

ECONOMIC EXPANSION

JOB GROWTH & UNEMPLOYMENT RATE

HMS Global Maritime plans to open a training and support center in New Albany that could create as many as 50 new jobs. The center is expected to accommodate 200 to 300 trainees annually and would be an $800,000 investment.

Auto components supplier, Piston Automotive, will invest $1.5M in an expansion of its Lousville operation, which is expected to create 50 full-time jobs.,

Global automotive supplier, Denso Products and Services Americas, plans to invest $9.5M in River Ridge to establish an operation at 301 Logistics Ave. The project will create 50 jobs. Denso manufactures advanced technology and vehicle components for most major automotive brands.

Fives Intralogistics Corporation proposed a $15M Louisville expansion that is expected to create 64 jobs in the first year and as many as 370 jobs over a 10-year period, according to documents filed with the Kentucky Economic Development Finance Authority. The jobs would pay an average hourly wage of $48/hr. including benefits.

a

As of the end of February 2019, unemployment rates in the Louisville area experienced an increase from 3.7% (as of Q3 2018) to 3.8%. Louisville’s unemployment rate is in line with the national average, which was 3.8% for the same period.

EMPLOYMENT & UNEMPLOYMENT TRENDS

LOUISVILLE JOB GROWTH TRENDS

LOUISVILLE METRO AREA

Q1 2018 Q3 2018 Q1 2019

GMP (% Change) 1.6% 2.0% 0.4%

EMPLOYMENT (% Change) 0.0% 0.0% 0.0%

UNEMPLOYMENT RATE (%) 3.9% 3.7% 3.8%

Source: Bureau of Labor Statistics

EMPLOYMENT IN THOUSANDS

Source: Cushman & Wakefield | Commercial Kentucky

a

a

a

2LOUI SVI L L E , KEN T UCKYMARKET INSIGHTFirst Quarter 2019

The Louisville multifamily market continued to see average rental growth over the last 6 months, even with the strong flow of new and proposed product in and around the Louisville MSA. Occupancy rates are at 96% overall. This is down 0.5% from April 2018 occupancy rates of 96.5%. Highest submarkets are Area 1 (at 99%) and Areas 7,8 & 9 (all at 98%).

Average rents for 1 BR units are at $882/mo. with average rents for 2 BR units at $976/mo. While rental rates throughout the Louisville Metro are up slightly, rates for both 1 and 2 BR unit rentals should continue to

Average effective rents in the Louisville Metro market have surpassed market projections and have grown from from $957/mo. in Q3 2018 to $1,068/mo. in Q1 2019. These rents are forecast to see modest increases for the remainder of 2019.

2,160 units were completed in the last 12 months, and over 3,200 units are currently under construction in the Louisville Metro area.

Additionally, over 6,500 units are planned throughout the Metro area, with two submarkets planning over 1,000 units each. Those submarkets are Area 2 (with 1,300 units planned) and Area 8 (with just over 1,000 units planned),

The MSA population is projected to grow by 18% between 2010 and 2040. The projected gain of households is 21% for the same period.

The following are Cushman & Wakefield’s projections over the near term:

MULTIFAMILY TRENDS

HISTORICAL & FORECASTED METRO RENT GROWTH RATES

DEVELOPMENT / INVENTORY

DEMOGRAPHIC FUNDAMENTALS

Average Occupancydecrease of 0.5% from 9/2018

LOUISVILLE RENT GROWTH RATES

96%

MULTIFAMILY FORECAST

VACANCYREN TS P IP EL INE % G ROWTH

Source: AXIOMetrics Forecast is 12-month outlook

2000: 1,025,5982010: 1,235,7082016: 1,293,9532021: 1,320,600

Current%: 32.0Current #: 178,775

Current: $57,279

POPULATION

PERCENT RENTER

HOUSEHOLDS

MEDIAN HOUSEHOLD

INCOME

Respective Average Rental Ratefor 1 and 2 BR units from 4/2018

10% and 6%

3.67%2.86% 2.73% 2.78%

1.60%

10.30%

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q3 '18 Q1 '19

3LOUI SVI L L E , KEN T UCKYMARKET INSIGHTFirst Quarter 2019

Multifamily investment activity for Q1 2019 in the Louisville MSA rose sharply. With occupancy rates high and the recent rent increases, the market is very active.

Regional and national apartment funds have been the largest active players for acquiring multifamily in the Louisville marketplace. Private capital also continues to play a major role in the B & C market.

Class B – Campus Crest @ Louisville sold The Arch Apartments (252 units) to Capstone Real Estate Investments for $101K per unit. The asset is located in the Central/Downtown Area.

Class A – Poe Companies sold Dundee Place Apartments, (20 units) located in the Central/Downtown Area to a private investor. The sale price was $172K per unit.

Class A – Edwards Companies sold Highland Station (195 units) to The Connor Group for $190K per unit. This property is located in the Central/Downtown Area.

The market’s mid-quartile spread is 5.6%, which is down slightly from the last quarter.

INVESTMENT ACTIVITY

NOTABLE SALES

PRICING & CAP RATES

HISTORICAL SALES VOLUME

Source: Real Capital Analytics, Commercial Kentucky | Cushman & Wakefield Research

Source: Real Capital Analytics, Commercial Kentucky | Cushman & Wakefield Research

$0

$100

$200

$300

$400

$500

$600

-60.0%

-40.0%

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

Change in Sales (YOY)

0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%

9/1/

2014

12/1

/201

4

3/1/

2015

6/1/

2015

9/1/

2015

12/1

/201

5

3/1/

2016

6/1/

2016

9/1/

2016

12/1

/201

6

3/1/

2017

6/1/

2017

9/1/

2017

12/1

/201

7

3/1/

2018

6/1/

2018

9/1/

2018

12/1

/201

8

Avg Cap Rate

Louisville Average National Average

4LOUI SVI L L E , KEN T UCKYMARKET INSIGHTFirst Quarter 2019

SUBMARKET OVERVIEW

RENTS & VACANCY BY SUBMARKET

UNDER CONSTRUCTION BY SUBMARKET

Source: Cushman & Wakefield | Commercial Kentucky ResearchNote: Submarkets are defined by Integra Realty Research

Source: Integra Realty Research

0

493

0

493

288

0

872

264

00

100

200

300

400

500

600

700

800

900

1000

SELECT CBD SUBMARKET NEWS

• Hills Properties recently purchased land at Shelbyville Road and Whittington Parkway and plans the 268-unit Rialto on Hurstbourne. These luxury apartments are part of a $100M redevelopment of the 27-acre Hurstbourne Business Park

• Lexington, KY-based Winterwood, Inc. filed plans with Planning & Zoning to construct 198 units in Area 1 - Dixie Highway Corridor. The site for the proposed McDeane Road Apartments is not far from a Kroger Marketplace and is just west of Iroquois Park.

• Stout Apartments, a 104 unit complex, is being planning for Butchertown. Indianapolis developer, Deylen Realty is looking at this as part of a $20M apartment/retail development for the prominent Butchertown site.

• Deliveries since Quarter 3 of 2018 include Cityscape’s Flats at Springhurst (249 units), LDG Development’s Bristol Bluffs (216 units), Edward Companies’ The Baxter (261 units), and Capital Investments’ Edge on 4th Street (232 units).

• Jefferson Development’s ambitious One Park development has been downsized from a planned 581 apartment units to 421 units.

• Vinings at Claiborne is under construction. Phase I includes 274. Jefferson Development’s plans for the entire development are to build 1,323 units in total.

• Philadelphia-based Springer Capital purchased the 46 year old Parliament Square Apartments at the end of the year. Plans for the 258-unit property include a full renovation with Class A finishes.

2%

2%

2%

6%

6%

7%

7%

7%

1%

0% 10% 20% 30% 40% 50%

New Cut Rd

So. Preston Hwy

So. Bardstown Rd

Mid-Bardstown Rd/Taylorsville Rd

Shelbyville Rd

East Brownsboro/Westport Rd

Frankfort Ave/Brownsboro Rd

CBD

Dixie Hwy

Vacancy Rate

$875

$875

$925

$950

$1,250

$1,090

$1,060

$1,300

$750

New Cut Rd

So. Preston Hwy

So. Bardstown Rd

Mid-Bardstown Rd/Taylorsville Rd

Shelbyville Rd

East Brownsboro/Westport Rd

Frankfort Ave/Brownsboro Rd

CBD

Dixie Hwy

Avg Rents

Copyright © 2017 Cushman & Wakefield. All rights reserved. The information contained within this report is gathered from multiple sources considered to be reliable. The information may contain errors or omissions and is presented without any warranty or representations as to its accuracy.

About Cushman & Wakefield

Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 45,000 employees in more than 70 countries help occupiers and investors optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $6 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. 2017 marks the 100-year anniversary of the Cushman & Wakefield brand. 100 years of taking our clients’ ideas and putting them into action. To learn more, visit www.cushwakecentennial.com, www.cushmanwakefield.com or follow @CushWake on Twitter.

commercialkentucky.com

Craig CollinsSenior DirectorCushman & Wakefield | Commercial Kentucky 333 East Main Street, Suite 510Louisville, KY 40202 Tel: +1 502 589 5150 [email protected]

Mike KemetherVice Chair, Multifamily Advisory GroupCushman & Wakevield1180 Peachtree Street, Suite 3100 Atlanta, GA 30309 Tel: +1 404 853 5269 [email protected]