The Louisville office market enjoyed a strong start to the first quarter of the year. Then COVID-19 hit the United States and, to no one’s surprise, activity in the Louisville office market slowed during the second quarter. But in what might be a surprise? The office news wasn’t all bad here during the quarter.
Cushman & Wakefield Commercial Kentucky recently released its second quarter office report. And despite the overall slowdown caused by COVID-19 and the economic upheaval left in its wake, Louisville still saw positive net absorption of 25,674 square feet of office space in its CBD during the quarter.
This brings the year-to-date total to a positive net absorption of 14,060 square feet in Louisville’s CBD. That’s an improvement from the negative 47,010 square feet of overall net absorption that the Louisville office market recorded in the CBD after the first two quarters of 2019.
In more good news, Commercial Kentucky reported that the vacancy rate in Louisville’s CBD fell 30 basis points from 18.2 percent to 17.9 percent at the end of the second quarter. The Class-A vacancy rate remained flat at 19.5 percent, while the Class-B vacancy rate fell 50 basis points from 17.3 percent to 16.8 percent.
The overall average asking rent increased from $16.68 a square foot in the first quarter to $16.72 a square foot at the end of the second. Class-A average asking rent remained constant at $18.74 a square foot, while Class-B average asking rent increased from $14.86 a square foot to $14.88 a square foot.
The suburban Louisville office market had a solid quarter of leasing activity with 105,537 square feet of office space leased. This brought the year-to-date toal to 297,708 square feet, almost 54,000 square feet more than at the same point last year.
The Hurstbourne/Eastpoint and Northeast submarkets had the most activity with 62,562 square feet and 35,338 square feet of office leasing activity respectively.
The overall net absorption for the suburban office market ended the second quarter at a positive 28,700 square feet, which brought the year-to-date total to negative 36,290 square feet.
The overall vacancy rate in the Louisville suburban market fell 30 basis points from 10.3 percent to 10 percent at the end of the second quarter. The Class-A vacancy rate decreased from 11.6 percent to 11 percent while the Class-B rate increased from 8.6 percent to 8.7 percent. The Northeast submarket saw the biggest vacancy dip, falling from 17.2 percent to 10.4 percent, a fall of 680 basis points.
The overall average asking rent in the suburban office market fell from $20.14 a square foot to $19.96 a square foot.
There weren’t many big office deals during the quarter, but Group RMC from New York City did purchase the East End Office Portfolio from Ascent Properties. The portfolio consists of seven office properties in the Plainview/Middletown submarket and totals 515,000 square feet. Group RMC bought the properties for a total of $44.2 million.