The last five years have been good ones for the Louisville industrial market, transforming this key Kentucky city into one of the premier logistics hubs in the central United States.
Need proof? Just look at the numbers: In the last two years alone, the Louisville market has added 10 million square feet of speculative industrial development. And since 2003, employment in the logistics industry in Louisville has grown 20 percent, easily beating the national average of 8 percent.
Why has Louisville’s industrial market been so strong for so long. Powell Spears, managing director in the Louisville office of JLL, and Matt Hartlage, vice president in the same office, offer plenty of reasons.
The CRE pros point first to the presence of the UPS Worldport at the Louisville International Airport, which has encouraged plenty of ecommerce users to choose Louisville as a distribution hub. This includes companies such as GameStop, Best Buy and Guess.
At the same time, pharmaceutical companies have maintained a strong presence in the Louisville market. The growth of such companies as J. Knipper & Co., Owens & Minor and AmerisourceBergen have also contributed to the success of the Louisville industrial market.
“If you look back four years ago, we hit vacancy rates below 4 percent in the industrial market here,” Powell said. “That is going to attract any developer’s attention. What’s the made the difference since then? There has been a deeper pool of institutional developers who already had Louisville on their radars and were finally ready to make a jump into spec. Previously, the developers only wanted to focus on build-to-suit.”
Powell also pointed to the continued development of the River Ridge Commerce Center in Jeffersonville, Indiana, about 10 miles from Louisville. That additional submarket boasts less expensive land, which has been a draw to even more industrial users.
This extra submarket has opened Louisville up to new industrial players, Powell said, companies such as The Opus Group and VanTrust Real Estate.
“Previously, they had been kicking the tires here, but now they are active in our market,” Powell said.
The increase in spec industrial development hasn’t resulted in an increase in vacancy rates. The demand for modern warehouse and distribution space is strong enough to absorb the new construction, Hartlage said.
Hartlage pointed to Louisville’s east submarket, home to three recent spec industrial projects. Two of them were fully leased before completion, Hartlage said. The third already has a significant portion of its first building pre-leased.
“That is confirmation that our east submarket is tight and that there is demand for that product,” Hartlage said.
The ecommerce boost
Like in most markets in the Midwest, Louisville’s industrial sector is getting a major boost from ecommerce companies. UPS is a key factor in that. The Worldport hub makes it easy for ecommerce companies to ship their products quickly to consumers.
Amazon also has centers on both sides of the Ohio River. Keen Footwear has its own distribution facility in Bullitt County, while ecommerce firm Radial also has a significant distribution-center presence in the market.
“The list goes on and on,” Powell said. “For every ecommerce company that vacates the market, two or three new ones are interested in establishing a fulfillment center here.”
The only negative with the growth of ecommerce here? It can make it difficult for companies throughout the Louisville market to find enough labor. This is a national issue, of course, not just a Louisville one.
Powell said that especially during peak seasons – say from September through January – the labor pool tightens in the Louisville market.
Despite that concern, Powell and Hartlage both say they expect the industrial market in the Louisville area to continue to grow throughout 2018.
“You can reach two-thirds of the population of the country in a day’s truck drive from Louisville,” Hartlage said. “That UPS ground presence is a big draw. FedEx has its ground-sort facility out east, which has opened up some competition on rates. Even in the down market, Louisville sustained activity fairly well. You combine those positives, and it makes Louisville a very attractive market to tenants, developers and investors.”
