Louisville, KY Multifamily Market Report
Market Overview
In recent years, Louisville’s multifamily market has exhibited noteworthy resilience, positioning it as a robust hub in Kentucky. Over the past decade, Louisville has experienced steady population growth, adding thousands of new residents annually. As of March 2023, the region sustained its economic momentum, with total employment surpassing pre-pandemic levels by 1.8%. Notably, sectors like e-commerce, healthcare, and logistics have been key drivers of this growth, attracting both businesses and residents alike. However, the market has encountered challenges, such as a surge in construction activity. This has led to a temporary imbalance between supply and demand.
Rents | Vacancy | Construction
Construction is booming in Louisville, with approximately 4,800 units currently underway, representing 5.3% of the market’s inventory. Louisville’s multifamily vacancy rate stands impressively low at 6.6%, outperforming the national average, which could peak at 8% by early 2024. Rent growth remains steady at 3.9%, indicating sustained demand for rental properties in the region. At an average asking rent of $1,160 per month, Louisville boasts some of the most affordable rental rates in the region. This has positioned the city as an attractive destination for tenants seeking quality housing at competitive prices.
The disparity in rental rates among different property types, with Class A properties commanding higher rents averaging $1,440, highlights the city’s diverse rental market catering to various income brackets and preferences. While downtown Louisville experienced a temporary setback in rent growth during the pandemic, the submarket has shown signs of recovery, reflecting the resilience of the city’s urban core. Looking ahead, rent growth in Louisville is projected to remain solid, with gains averaging around 3% per year over the next three years. This has reinforced the city’s status as a stable and attractive investment destination in the multifamily sector.
Sales
Despite modest investment activity, with sales volume totaling just over $126 million in the previous year, market fundamentals in Louisville’s multifamily sector remain stable. Quarterly volume saw a slight increase in Q3 2023, returning to pre-pandemic averages. However, muted sales volume may persist in the coming months as market fundamentals soften and interest rates remain elevated, posing challenges for potential investors.
Institutional investors, typically representing a small share of buyers, were notably absent in the first three quarters of 2023, indicating a shift in the buyer profile towards individual buyers. Recent transactions reflect this trend, with investments primarily driven by local and out-of-state buyers seeking opportunities in the Louisville market. These transactions emphasize continued investor interest and confidence in the city’s multifamily sector despite prevailing economic uncertainties. However, economic uncertainty and softening market fundamentals may continue to weigh on deal volume in the coming months. This is prompting investors to adopt a cautious approach and wait for clearer signals before making significant investment decisions.
Louisville By the Numbers | Last 12 Months | Source: CoStar Group
- Vacancy Rate: 6.6%
- Rent Growth: 3.9%
- Units Delivered: 1,796
- Units Absorbed: 2,256
- Sales Volume: $126M
