Phil Charmoli, senior director with Cushman & Wakefield Commercial Kentucky, said that the Louisville industrial market has been a strong one since 2010, and has only continued to see more activity.
“We break records every year when it comes to absorption and new construction,” Charmoli said. “And I don’t see that stopping anytime in the next couple of years or so.”
Both new construction and sales activity levels are high here, Charmoli said. Developers and REITs are buying large bulk industrial buildings today in the Louisville market. And Charmoli doesn’t see this activity slowing anytime soon, either.
The reason for all this activity? Distribution centers need to get their product out to as much of the population of the United States as quickly as they can. This isn’t true only for ecommerce companies, either, Charmoli said. All companies today want to ship their items to consumers in as few days as possible.
Louisville boasts an excellent location along the Interstate-65 corridor. As Charmoli said, drivers can get to much of the country within a 10-hour truck drive from Louisville.
These positives are inspiring developers, who have flocked to Louisville today.
“There are more industrial buildings going up than ever before,” he said.
These spec buildings are filling at a steady pace. But it is taking a bit longer for the biggest of these industrial buildings to nab clients, Charmoli said. He said that it’s becoming more challenging for owners to fill up 400,000-square-foot industrial buildings with single tenants. Because of this, many owners are splitting their large industrial spaces into smaller halves.
“If you have a 500,000-square-foot building, you split it into a pair of 250,000-square-foot spaces,” Charmoli said. “That works for most of these larger buildings. There aren’t as many single-tenant users out there as there once was.”
Why this trend? Charmoli says that ecommerce plays a role in this. Ecommerce companies are looking for that last-mile location, trying to get their distribution centers as close to urban population centers as possible.
These last-mile buildings generally aren’t as large. They might be 100,000 square feet instead of 200,000 or 300,000 square feet, Charmoli said. The demand for smaller industrial space, then, will continue to rise as more companies try to get ever closer to the centers of major cities.
“I think the industrial market in Louisville will continue to be as strong if not even stronger in the coming months and into next year,” Charmoli said. “The developers are bullish about Louisville and the market. Our absorption rate will break records again in 2018. We might be slightly overbuilt both in Southern Indiana and the Louisville area, but it is not something that a couple of deals couldn’t overcome.”