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JLL Research
Louisville | Q1 2017
Industrial Outlook
JLL Research
An in-depth look at the Louisville industrial market. Analysis includes leasing, sales, construction and employment.
© 2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
Q1 2017
Insight
Louisville Industrial Outlook
After finishing 2016 with ten straight years of positive absorption, the Louisville market delivered once again in the first quarter with 605,767 square feet of absorption. Driven by Arvato’s lease signed at Molto’s645,000-square-foot Airport Commerce Center II and multiple deals signed in the Riverport submarket leasing activity started 2017 on a high note. While there are quality large blocks of space available in the market, only three exceed 500,000 square feet of space with one currently under construction. With multiple large tenants in the market, developers will look to begin construction on larger projects as current blocks of available space are absorbed in the next two quarters.
The first quarter saw multiple project announcements within the Airport and East submarkets as developers look to infill sites to attract tenants in the market. As land costs and competition have increased in the Bullitt County and Southern Indiana submarkets, one-off infill sites will continue to attract developers looking to enter or expand in the market. Landlords continue to push leasing rates with average rates remaining at 5-year highs.
OutlookAs the product in the development pipeline delivers in the first half of 2017, vacancy rates are projected to remain inflated and rental rates will level off, at least in the short-term. Investment activity is forecasted to ramp up into 2018 as projects in the pipeline are leased up, and investors look for footholds in the market to add to their portfolios. Located within a day’s drive to two-thirds of the U.S. population and several important distribution hubs, Louisville’s location was made even more desirable with Amazon’s pledge to invest $1.5 billion in a 3.0-million-square-foot air services hub at CVG Airport in Northern Kentucky. This announcement in addition to the UPS Worldport facility and multiple ground hubs in Louisville will continue to drive demand from e-commerce and 3PL users.
Fundamentals Forecast
YTD net absorption 605,767 s.f. ▲QTD net absorption 605,767 s.f. ▲Under construction 1,804,553 s.f. ▲Total vacancy 10.2% ▼Average asking rent (NNN) $3.70 p.s.f. ▲Tenant improvements Falling ▼
0
5,000,000
10,000,000
2013 2014 2015 2016 YTD
2017
Supply and demand (s.f.) Net absorptionDeliveries
Industrial market quick out of the gate to start to 2017
7.2% 6.6% 5.7%
8.7%10.2%
2013 2014 2015 2016 YTD 2017
Total vacancy
$3.30
$3.40
$3.50
$3.60
$3.70
$3.80
2013 2014 2015 2016 YTD 2017
Average asking rents ($/s.f.)
• The modern bulk market built upon momentum from a successful 2016 with 605,767 square feet of positive absorption in Q1.
• Developer confidence remains high as they continue to acquire land for speculative development in every submarket.
• Clarion Partners purchased the 645,840-square-foot Air Commerce II from Molto Properties for $42.3 million to end the quarter.
© 2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
Inventory
(s.f.)
YTD
total net
absorption
(s.f.)
YTD
total net
absorption
(% of stock)
Total
Vacancy (%)
Average
total asking
rent
($ p.s.f.)
YTD
completions
(s.f.)
Under
construction
(s.f.)
Airport 20,169,841 645,840 3.2% 3.3% *$3.90 645,840 452,745
Bullitt County 12,261,199 0 0.0% 10.1% $3.83 0 981,010
East 5,028,451 0 0.0% 0.0% $5.50 0 0
Riverport 11,957,666 -40,073 -0.3% 9.6% $3.14 0 370,798
Southern Indiana 9,460,055 0 0.0% 30.9% $3.86 1,257,600 0
Louisville Totals 58,877,212 605,767 1.0% 10.2% $3.70 1,903,440 1,804,553
Analyzes all industrial buidings greater than 100,000 s.f. with a minimum clear height of 24'
2,117,585
1,014,608
1,750,850
2,234,6481,934,181 2,059,001
2,742,8893,029,702
3,843,783
605,767
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Q1 2017
Statistics
Louisville Industrial Outlook
15.1% 15.6%
12.2%
9.2%8.3%
7.2%6.6%
5.7% 8.7%
10.2%
2.0%
5.0%
8.0%
11.0%
14.0%
17.0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 YTD 2017
Total vacancy rate (%)
Total net absorption (s.f.)
© 2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
This report analyzes industrial sales in the last 12 months > 100,000 s.f.
$212,852,385
10
*$68
6.15-7%
100.0%
0.0%
6-6.5% 0 - -
7.5% 0.0% 10 $212,852,385
Top 10 sales transactions the past 12 months
Size (s.f.) $ p.s.f. Sale date
645,840 $65 Mar-17
303,369 $138 Apr-16
611,000 $53 Jun-16
470,000 $55 Jun-16
151,750 $117 Feb-17
270,000 $55 Jun-16
221,000 $55 Jun-16
137,500 $82 Jun-16
212,500 $46 Apr-16
Setzer Properties
ARES
Radial Inc. (Formerly eBay)
The LandMark Group
$41,893,105
$32,200,000
$25,605,600
$17,700,000
2311 South Park Rd Monmouth Real Estate Gray Construction $11,304,000
9001 Cane Run Rd Industrial Property Trust Brennan Investment Group $9,700,000
Radial Inc. (Formerly eBay) $14,709,600
7700 Trade Port Dr Industrial Property Trust Radial Inc. (Formerly eBay) $12,040,080
9101 Cane Run Rd Industrial Property Trust
7601 Trade Port Dr Industrial Property Trust
65 Kingbrook Pkwy Berger Foundation
12900 Plantside DrColumbia Property
Investors
649 Omega Parkway Industrial Property Trust
2500 Export Drive Clarion Partners Molto Properties $42,300,000
Building address Buyer company Seller company Sales price $
Sales volume $ by submarket
Warehouse/Dist. sales
volume as % of total YTD
Flex/R&D sales volume as %
of total YTD
Cap rate range
Core Class A Ind.
Core Class A Flex
Average Class A price p.s.f.
YTD* (skewed by Fedex and
Faurecia sales)
At a glance
Total volume YTD
Number of transactions YTD
Average Class A cap rate
YTD
Sales activity by building type
Transactions details
Number of partial interest
transactions
Top sellers (s.f.)Top buyers (s.f.)
Number of domestic
buyers
Foreign capital $
Average partial interest
acquired
Number of foreign
buyers
Domestic Capital $
3,149,124 s.f.
$212,852,3850 s.f.
500,000 s.f.
1,000,000 s.f.
1,500,000 s.f.
2,000,000 s.f.
2,500,000 s.f.
3,000,000 s.f.
3,500,000 s.f.
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
Warehouse / Distribution
Sum of Price ($) Sum of RBA (SF)
57%
20%
10%
5%4% 4%
Industrial Property Trust Clarion Partners
Columbia Property Investors Berger Foundation
Monmouth Real Estate Another Room Self Storage
31%
21%19%
10%
7%
5%4% 4%
Radial Inc. (Formerly eBay) Molto Properties
ARES Setzer Properties
Brennan Investment Group The LandMark Group
Gray Construction DCT Industrial
$67,455,280
$59,593,105
$53,604,000
$32,200,000
Riverport
East
Airport
Bullitt County
Q1 2017
Sales
Louisville Industrial Outlook
57%
20%
10%
5%4% 4%
Industrial Property Trust Clarion Partners
Columbia Property Investors Berger Foundation
Monmouth Real Estate Another Room Self Storage
31%
21%19%
10%
7%
5%4% 4%
Radial Inc. (Formerly eBay) Molto PropertiesARES Setzer PropertiesBrennan Investment Group The LandMark GroupGray Construction DCT Industrial
© 2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
This report analyzes all industrial developments under construction & new deliveries > 100,000 s.f.
Total leased at delivery (%) 54.0%
Total speculative at delivery (s.f.) 3,835,572
Total BTS at delivery (s.f.) 2,076,969
Total Owner-User at delivery (s.f.) 362,500
Total # of properties delivered 18
Asking rental rate (low - high) $3.69 - $4.25
Top 5 projects delivered past 12 months
Building RBA (s.f.) Delivery dateLeased at
delivery (%)
Crossdock River Ridge 664,800 Q1 2017 0%
Aiport Commerce Center II 645,840 Q1 2017 100%
Van Trust River Ridge 592,800 Q1 2017 0%
LogistiCenter at 480 546,000 Q4 2016 0%
Pinchal River Ridge 458,640 Q3 2016 0%
Total pre-leased (%) 0.0%
Total speculative under construction (s.f.) 1,804,553
Total BTS under construction (s.f.) -
Total Owner-user under construction (s.f.) -
Total # of properties UC 4
Asking rental rate (low - high) $3.75 - $4.25
Top projects currently under construction
Building RBA (s.f.) Delivery datePre-leased
(%)
Velocity 65 Bldg 1 721,050 Q3 2017 0%
New Cut Center Bldg 1 452,745 Q2 2017 0%
Riverport Distribution Center 370,798 Q2 2017 0%
Park 65 Business Center 259,960 Q4 2017 0%
Speculative
Speculative
Speculative
Submarket
Under construction
1,804,553Under construction (s.f.)
Under construction in-depth
Upcoming deliveries by year (s.f., excludes YTD completions)
New deliveries
Completions in-depth
6,275,041Total delivered past 12 months (s.f.)
Historical deliveries (s.f.)
Construction typeOwnerSubmarket
Southern Indiana
Bullitt County
Southern Indiana
Airport
Southern Indiana
Pinchal & Co.
Dermody Properties
Van Trust
Molto
Crossdock Dev.
Speculative
Speculative
Bullitt County
Riverport
Airport
Bullitt County
Speculative
Owner Construction type
Speculative
Johnson Development
IAC
Main Street Realty
Browning
Speculative
Speculative
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
2010 2011 2012 2013 2014 2015 2016 YTD 2017
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
2017
Speculative
Q1 2017
Construction
Louisville Industrial Outlook
© 2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
Q1 2017
Construction
Louisville Industrial Outlook
New Cut Center Bldg 1Signed tenant(s): noneSquare Feet: 452,745Landlord: Main Street Realty
Est. completion: Q2 2017
Gateway 600Signed tenant(s): noneSquare Feet: 592,800Landlord: VanTrust
Completed: Q1 2017
Air Commerce Center IISigned tenant(s): ArvatoSquare Feet: 645,840Landlord: Molto Properties
Completed: Q1 2017
Velocity 65 Bldg 1Signed tenant(s): noneSquare Feet: 721,000Landlord: Browning Investments
Est. completion: Q3 2017
Crossdock River RidgeSigned tenant(s): noneSquare Feet: 664,800Landlord: Crossdock Development
Lewis and Clark Bridge
Completed: Q4 2016
Completed: Q1 2017
© 2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
23%
13%
13%13%
12%
10%
7%
Trade, Transportation & Utilities
Educational & Health Services
Professional & Business Services
Manufacturing
Government
Leisure & Hospitality
Financial Activities
Mining, Logging & Construction
Other Services
Information
Q1 2017
Employment
Louisville Industrial Outlook
4.7%U.S. unemployment
1.5%U.S. 12-month job growth
4.7%Louisville unemployment
2.8%Louisville 12-month job growth
5.0%Kentucky unemployment
1.6%Kentucky 12-month job growth
0.0%
0.7%
1.4%
2.1%
2.8%
3.5%
2013 2014 2015 2016 2017
Louisville U.S.
-300
100
100
100
700
1,100
1,600
4,400
4,700
5,300
-2,000 -1,000 0 1,000 2,000 3,000 4,000 5,000 6,000
Government
Information
Leisure & Hospitality
Other Services
Financial Activities
Educational & Health Services
Mining, Logging & Construction
Trade, Transportation & Utilities
Manufacturing
Professional & Business Services
-2.0
3.0
8.0
13.0
18.0
2013 2014 2015 2016 2017
Professional & Business Services Information
Government Financial Activities
0%
4%
8%
12%
400,000
500,000
600,000
700,000
800,000
2013 2014 2015 2016 2017
Employment Unemployment
Employment vs. unemployment rate
Employment by industry Office employment trends (12-month change, 000s)
Job growth by sector (12-month change)
Job growth (12-month change)
Job growth by sector (12-month change)
© 2017 Jones Lang LaSalle IP, Inc.
All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
Andrew BatsonVice President, Director of Research+1 216 937 [email protected]
Ross BratcherResearch Analyst+1 513 719 [email protected]
About JLL
JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. AFortune 500 company, JLL helps real estate owners, occupiers and investors achieve their business ambitions. In 2016, JLL had revenue of $6.8 billion and fee revenue of $5.8 billion and, on behalf of clients, managed 4.4 billion square feet, or 409 million square meters, and completed sales acquisitions and finance transactions of approximately $136 billion. At year-end 2016, JLL had nearly 300 corporate offices, operations in over 80 countries and a global workforce of more than 77,000. As of December 31, 2016, LaSalle Investment Management has $60.1 billion of real estate under asset management. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit www.jll.com.
About JLL Research
JLL’s research team delivers intelligence, analysis and insight through market-leading reports and services that illuminate today’s commercial real estate dynamics and identify tomorrow’s challenges and opportunities. Our more than 400 global research professionals track and analyze economic and property trends and forecast future conditions in over 60 countries, producing unrivalled local and global perspectives. Our research and expertise, fueled by real-time information and innovative thinking around the world, creates a competitive advantage for our clients and drives successful strategies and optimal real estate decisions.