Multifamily Market Overview

Lexington, KY

The apartment market in Lexington is performing at a steady pace, with above-average net absorption and limited deliveries keeping vacancies well below the long-term average. In 2021, the market saw negative demand but is improving with a modest development pipeline to keep vacancy in check in the coming quarters. Lexington’s economy is heavily supported by its submarkets, such as West and East Lexington. West and East Lexington represent nearly one-third of market-wide demand over the past 12 months.

Vacancy

Post-pandemic, Lexington saw rises in vacancy, and in 2020 continuing into 2021, rates fell below the national average for the first time in the market’s history. However, a significant drop in demand paired with new supply has helped push the vacancy back up nearly 100 basis points, back in line with the national average at 5.5 percent. The submarket Jessamine County is also a top contender for demand, representing 14 percent of market-wide net absorption in the past year. Downtown Lexington and its surrounding areas have the highest vacancies, but incoming demand is anticipated to put levels back on track.

Rent

Annual rent growth in Lexington is elevated, averaging 8.1 percent. Rent prices among four- and five-star properties are in line with national trends, with annual gains of 7.2 percent. Incoming demand can be seen in Downtown Lexington, with annual gains averaging nearly four percent, a strong recovery from the onset of the pandemic. The average asking rent in Lexington is $1,050 per month, with increased rent prices in luxury buildings in more affluent neighborhoods, such as East Fayette County. Rents are lowest in the outlying submarkets of Clark County and Bourbon County.

Construction

In the past year, Lexington received 360 units in deliveries, slightly below the market’s average. However, projects in the pipeline have increased with 1,100 units underway, representing 3.1 percent of existing inventory. The most recent project to deliver is the W at Brannon, which added 215 units to the market in Q2 22. This property’s average asking rent is $1,250 per month.

Sales

Lexington’s market was significantly impacted by the pandemic, with just $91 million in trading hands in 2020, a large drop from the number of deals completed over the prior three-year period. However, in recent quarters, sales have rebounded, and deal volume over the most recent 12 months has been at a record level with $471 million trading hands. The recovery can be attributed mostly to private buyers, who make up about 70 percent of acquisitions within the past year. The average price per unit is $110,000, sitting slightly below other markets in the region. Cap rates align with neighboring areas at 5.8 percent but sit 90 basis points above the national average, drawing yield-motivated investors to the area.