Q2 2012 Louisville, Kentucky Office Market Trends

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Q2 2012 Louisville, Kentucky Office Market Trends

The Louisville general purpose, multi-tenant office market ended the second quarter of 2012 with a vacancy rate of 15.0%, according to Reis data. This is down 10 basis points from the prior quarter and unchanged over 12 months. The rate has not changed greatly since the end of 2011. The Class A rate is reported at 13.2%, unchanged from the first quarter, and the Class B/C rate is 16.2%, also unchanged. First Glance data from Reis give a third quarter vacancy rate of 15.3%. Net absorption barely registered at 8,000 square feet, after a positive 73,000 square feet in the first quarter. This market does not have a history of strong demand, and is forecast to finish 2012 with a low 133,000 square feet on the positive side, just outpacing the 125,000 square feet that completed earlier this year (marking the year’s new construction total). Vacancy is forecast to end 2012 at 14.8%.

After gains of 0.2% asking and 0.6% effective in 2011, Reis reports second quarter rates of $16.16 psf and $12.58 psf, down 0.1% and 0.2%, respectively, for the second quarter of 2012. These measures are up 0.5% and 0.6% over 12 months. The Class A asking rent is reported at $20.31 psf, down 0.5% for the quarter, and the Class B/C rent is $13.54 psf, up 0.2%. First Glance data show no change in the third quarter for the asking rent. After modest gains below 2.0% in 2012, somewhat larger annual increases are forecast.

In its mid-year 2012 analysis, Cassidy Turley reports Metro-Louisville office vacancy at 14.0%, net absorption at 494,381 square feet, and rental rates at $16.45 psf. Although “office sector fundamentals continue to show improvement, on all levels,” this source noted, “we do not expect the growth seen in the first half of 2012 to continue at the same pace for the balance of the year.”