Here’s what Powell Spears likes about Louisville: It’s steady.
Spears, industrial property specialist with Louisville-based Cassidy Turley/Harry K. Moore, said that industrial activity in the city has been consistent, even during the last two challenging years.
“We’ve been fortunate,” he said. “We saw a lot of our sister cities like Cincinnati, Nashville, St. Louis and Memphis see their industrial activity tail off. We were impacted by the economic slowdown, of course, but not to the degree that those other municipalities were.”
Louisville’s industrial business certainly didn’t spike during the last two years. But the market did experience a steady stream of positive net absorption during this time.
And during the last two years? That’s all anyone can ask of a market.
Last year, for instance, the Louisville-area industrial market saw a net absorption of just shy of 2 million square feet. That’s evidence of a market that is healthy.
The future looks good for Louisville, too. The market has only two industrial facilities of more than 400,000 square feet available. That’s leading to growing demand. And developers are considering plans to build five or six spec industrial buildings in the Louisville area.
Why is the industrial market so strong in Louisville? Spears points to several factors, but a key one remains the city’s strong location.
“Location is a key driver of real estate,” Spears said. “And we happen to have a great location in the center of the country.”
Louisville is also fortunate to be the home of the UPS Worldport Air Hub at Louisville International Airport. This is an attractive area amenity for businesses. The Worldport allows businesses to take advantage of next-day service and late pick-ups.
At the same time, Louisville sits within a two-day drive of 65 percent of the U.S. population.
“Because of our location and the Worldport, we are often referred to as an inland hub,” Spears said. “With the pharmaceutical industry, the products that they are shipping are often temperature-sensitive. So next-day service is important. And the late pick-up is a key component of that industry, too. So the Worldport and our location has helped us to attract many businesses in that industry.”
Louisville also boasts two area Ford plants. That brings a variety of suppliers and just-in-time operators that serve Ford to the area.
Then there is e-commerce. Companies like Amazon and eBay are growing quickly, and the Louisville market is playing a big role in such e-retailers’ plans. Amazon, for instance, last y ear made a big investment in the Louisville market, building a $150 million distribution center in the River Ridge Commerce Center in the Louisville submarket of Jefferson, Ind.
GSI Commerce, now owned by eBay, is also active in the Louisville area. The e-retailer occupies almost 2 million square feet of space in the city.
Research from Cassidy Turley backs up Spears’ optimism. According to the company, 2012 marked a record sixth straight year in which metropolitan Louisville’s Class-A industrial market saw positive net absorption. Last year, the market saw 1.9 million square feet of space absorbed.
Also last year, the metropolitan area’s industrial vacancy rate fell to 6.6 percent.
This doesn’t mean, though, that Louisville’s industrial market is invulnerable to overbuilding. Spears said that if all five or six spec industrial buildings currently under consideration in the region were built, it’d be a challenge to fill that new space.
If two or three went up by the end of year, though? Spears said that brokers would have a good shot of filling in that new space.