Solid. Steady. That’s how Stephan Gray describes the industrial sector in Louisville. And he should know: As president and senior director with Louisville-based Cushman & Wakefield|Commercial Kentucky, Gray has been working this market for decades.
Gray first joined Commercial Kentucky in 1985. He’s seen both up and down industrial markets. And while interest rates have slowed industrial sales, Gray said that the demand for industrial space throughout the Louisville market remains strong.
And once interest rates stabilize? That should provide another boost to Louisville’s industrial sector.
“Interest rates have affected developers and how they look at our market,” Gray said. “It’s difficult for developers today to get a finger on what their costs are going to be. Once they have a facility built and leased, it is obviously difficult to figure out what they might get for the property if they decide to sell. When you don’t know exactly where your costs are going to be during the construction process and you’re not sure what you are going to get out of the property, it really does affect development activity.”

Stephan Gray, president and senior director, Cushman & Wakefield|Commercial Kentucky
Despite the challenges of higher interest rates, most of Louisville’s industrial numbers remain solid.
According to the third quarter industrial market beat report published by Cushman & Wakefield|Commercial Kentucky, the industrial vacancy rate in the Louisville market stood at a low 3.3% as of the end of the third quarter. The report also shows that the Louisville market had absorbed 4.4 million square feet of industrial space as of the end of the third quarter.
Asking rents remain strong, too, with Cushman & Wakefield|Commercial Kentucky reporting that Louisville-area industrial properties are renting out for an average of $5.65 a square foot.
Gray said that he is particularly impressed by the Louisville market’s absorption numbers.
Gray said that during the last five years, the Louisville-area industrial market averaged 5.8 million square feet of absorption. With 4.4 million square feet already absorbed as of the end of the third quarter, Louisville looks set to again reach at least 5 million square feet of absorption.
“We are right there again this year, which is wonderful,” Gray said. “We have a Cushman industrial call every month, which gives us the benefit of hearing how other markets in the Midwest are performing. Not everyone is seeing the kind of leasing activity and net absorption that we are this year.”
Not all industrial types are performing equally well, though. Gray said that much of the Louisville market’s leasing activity is concentrated in industrial space of 100,000 to 300,00 square feet.
According to Cushman & Wakefield’s research, the overall net industrial absorption for the Louisville market totaled 1 million square feet in the third quarter. That marks the 33rd consecutive quarter that Louisville’s industrial market has seen positive net absorption.
The Southern Indiana submarket was a strong performer, seeing 1.2 million square feet of net absorption, largely thanks to Ryder Logistics moving into its newly completed 1-million-square-foot building.
Despite the challenges of higher interest rates, developers are still working the Louisville market. Cushman & Wakefield reported that the Louisville market saw 2.4 million square feet of new industrial construction during the third quarter. More than half of the new deliveries occurred in the Southern Indiana submarket, including a fully leased 1-million-square-foot distribution facility by Van Trust Real Estate and a 130,500-square-foot expansion for Genpak.
The Bullit County, West/Southwest and East submarkets also saw new deliveries in the third quarter of 711,975 square feet, 407,280 square feet and 26,610 square feet, respectively.
“I think the economy remains pretty strong despite what interest rates are doing and despite geopolitical activity,” Gray said. “Companies are making money and growing still. That undercurrent helps to prop up our market. It helps our market immensely. UPS’ North American hub is here in Louisville. That helps our market quite a bit. And we have the space for industrial users. We have a good variety of spec buildings ranging from a couple hundred thousand square feet to more than 1 million square feet. We have something for everyone.”
End users are able to find industrial space today in Louisville, Gray said. That should hold true in 2024, too, he said. The challenge? That could come in 2025. As Gray says, it’s uncertain how much new industrial space developers will add to the Louisville market in 2024.
“I don’t think that we’ll see the level of construction next year that we did this year,” Gray said. “If we fill up what we have built this year and we don’t get enough new construction next year, that could leave us in a bit of a lurch once 2025 gets here.”
Today, though, there are plenty of industrial facilities available for end users, Gray said. At the same time, spec space here is filling up steadily with tenants, he said.
Gray points to the steady growth of ecommerce activity as one of the main reasons for the long-term success that the industrial market has seen. People were shopping online long before the COVID pandemic hit. But since COVID, they’ve been even more willing to order just about anything, including groceries, online.
This has increased the need for companies to open distribution centers and warehouses across the country. Louisville, with its central location, benefits from this trend.
“When COVID first hit in early 2020, no one knew what was going to happen,” Gray said. “By mid-year, though, it became clear: Consumers were still going to spend. Ecommerce carried the day.”
This doesn’t mean that Louisville’s industrial market doesn’t face challenges. The overall industrial vacancy rate here remained low at 3.3%. But it did increase from 2.7% at the end of the second quarter.
Certain submarkets had especially low vacancy rates. The Shelby County submarket ended the third quarter with an industrial vacancy rate of 1.1%, while in the South County submarket the vacancy rate stood at 2.2%. It was also a low 1% in the East submarket.
“You are now seeing more reshoring happening, with more companies bringing manufacturing back to the United States,” Gray said. “The American industrial base is on the rise. That bodes well for the future of the industrial sector.”