Multifamily Market Overview

Louisville, KY

Increased demand paired with strong rent growth has attracted investor attention in Louisville. As a result of such strong demand, vacancy has fallen to a historic low of 5.5 percent, raising rent prices across the metro. The inventory for sale also remains low, pushing home prices to all-time highs and increasing the renter pool. Over the trailing 12-month period, multifamily sales totaled $1.4 billion, or 81 percent over the prior year’s total.

Vacancy

Low vacancy rates in Louisville can be attributed to pent-up demand formation in 2020 before vaccine availability, which caused renters to delay moves. Additionally, stable economic conditions support Louisville’s apartment market, which recovered quickly from job loss through the pandemic. As of Q3 22, employment levels are back to pre-pandemic numbers. Despite all-time high deliveries, demand still outplaced supply, resulting in vacancy going down by about 90 basis points over the past 12 months. Increased consumer demand can be seen in Downtown Louisville and the East End, where demand represents approximately 30 percent of annual net absorption in the market. In the future, vacancy is anticipated to rise as record-breaking deliveries hit the market, pushing vacancy to 6.5 percent by late 2024.

Rent

Louisville’s rent growth in 2022 compared to pre-pandemic levels are 12.5 percent higher, with the third quarter of 2022 sitting around eight percent. The average asking rent in the metro is approximately $1,080 per month, slightly below other regional markets such as Indianapolis or Cincinnati. Despite the annual gain in double-digit territory in Louisville’s sought-after submarkets, including St Matthews and East End, downtown Louisville is still underperforming the overall market, with gains nearing just four percent. In Class A properties, rent averages continue upward in areas south of the Ohio River, such as Crescent Hill and Lyndon. Rent is anticipated to level out in the future, averaging 4.5 percent growth annually.

Construction

Multifamily development has dramatically increased In Louisville with 4,100 units in the pipeline, representing 4.8 percent of inventory. The thriving submarket of Jefferson County represents 48 percent of all units under construction. In the past year, the largest delivery in Louisville has been The Louis Apartment Flats in 21Q3, which added 309 units with asking rent averaging $1,500 per month.  Upcoming projects include Lakeside Gardens, which is anticipated to add 360 units in Q4 22.  Late 2022 and early 2023 expect large-scale apartment building construction to continue with the completion of 264-unit The Slate and 238-unit Jefferson Landing.

Sales

As a result of Louisville’s rent growth and below-average interest rates, sale prices are reaching new highs. Sales totaled $1.4 billion in the trailing 12-month period, which is 81 percent above last year’s total. Q2 22 saw record highs with more than $600 million trading hands. Within the past year, the average price per unit increased by 15.7 percent, with cap rates compressing to 5.6 percent. Of the sales in the trailing 12-month period, 80 percent were completed by private buyers. Growth in sales by national investors is growing across Louisville as well-leased and recently renovated properties continue to drive sales volume. In June 2022, the closing of Claiborne Crossing marked the top sale year to date at $91 million. The trade consisted of 183 properties with units averaging $376,000, one of the highest price points over the past year. Louisville’s submarkets, such as East End and Outer East End, have been investor hot spots throughout 2022.