The Louisville apartment vacancy rate remains low despite some recent increases. At 4.7%, the rate is up 20 basis points from the prior quarter but down 10 year-over-year. Class A vacancy is reported at 4.6%, down 10 basis points over the quarter, while Class B/C vacancy, at 4.7%, is up 30 basis points over that time span. First Glance data from Reis show a third quarter overall vacancy rate of 4.3%. Construction has been light so far in 2012, but several projects are under way. Reis’ latest construction data show 540 market-rate units in four projects under construction, led by the 192-unit Reserves at Thomas Glen, outside Reis submarkets. Within Reis submarkets is the 150-unit River Breeze apartments; both projects are due in late 2012. Reis reports that from 2002 to 2011, new construction totaled 3,919, units, or 392 units per year on average. Net absorption in that time span totaled 3,581 units, or 358 per year on average. However, there were no apartment completions in 2010 or 2011, and net absorption totaled over 1,100 units those two years, allowing vacancy to fall precipitously. Reis predicts the vacancy rate will fall to 4.1% and remain at or below that level through 2016.
Rents are low in Louisville, but have shown growth. In the second quarter of 2012, average asking and effective rents increased 0.8% and 1.0%, respectively, to $678 and $652 per month. The 12-month gains are notable at 3.0% and 3.8%. First Glance data show an asking rent of $684 per month. For Class A units the asking average is $845 per month and Class B/C the rent is $585 per month. These rates are up 0.8% and 1.0% over the quarter. Overall rent gains of 3.5% asking and 4.2% effective are forecast for 2012, good news for landlords used to minimal rent gains.
In their 2012 Annual report, Marcus & Millichap states developers will add 300 apartment units this year, “marking a 0.7% increase in inventory.” Redevelopment of the Whiskey Row district will spur Class A investment activity downtown, this source notes.