MARKET SNAPSHOT
New completions reached an all-time high in 2024, with approximately 4,150 units added to the market. The third quarter alone set a record, with 1,500 units delivered. However, by the end of 2024, the number of units underway had declined from recent peaks, returning to levels consistent with the pre-2020 market average. Approximately 2,150 units remain under construction, representing 2.3% of total inventory—significantly below the national benchmark of 3.4% and a sharp drop from the market’s peak of 5.9% in 2023.
Multifamily construction Starts fell 69% year-over-year between 2023 and 2024. This decline will lead to a dramatic slowdown in deliveries in 2025, with only about 1,290 units expected to come online—a 69% annual decrease and the lowest level in eight years.
The Southern Indiana and South Jefferson County submarkets have consistently driven development activity in the Louisville metro area, accounting for approximately one-third of 2024 completions. Southern Indiana, in particular, continues to attract investment due to its strong population growth, among the highest in the market. The region has also benefited from substantial growth in the logistics sector, which has drawn companies across the Ohio River and bolstered housing demand. In 2025, around 450 units are slated for completion in Southern Indiana, representing 34% of all new deliveries expected in Louisville. Development activity remains strong in Downtown Louisville as well, with nearly 400 units—31% of the under construction inventory—scheduled to come online in the coming year.
Although net absorption significantly exceeded typical levels, multifamily occupancy in Louisville declined in 2024 as record-high deliveries outpaced demand. Over the past year, net absorption totaled 2,255 units—around 60% above the pre-pandemic average. However, during the same period, deliveries reached 4,164 units, more than double the 2015-2019 average. The surge in completions over the past two quarters pushed occupancy rates down by 70 basis points since the start of 2024, compared to a 20 basis-point decrease nationally.
Louisville’s occupancy rate now stands at 93.8%, equal to the national benchmark. However, unlike the U.S. overall, where vacancy is at a record high, Louisville’s rate remains well above its early 2020 bottom of 92.8% and just 10 basis points below its 10-year average. A relatively modest pace of deliveries in 2021 and 2022 helped maintain stability over the past year, while the market’s rapidly growing population paired with its shrinking construction pipeline will pave the way for improvements in the near future. Although CoStar’s base case forecast shows the average occupancy rate remaining largely unchanged in 2025, the massive drop in new completions anticipated in the coming year should have a more immediate positive effect.
Elevated vacancy rates in Louisville have recently placed downward pressure on average rent growth. However, annual gains remain healthy at 2.3%, outpacing the national benchmark of 1.1%. While rent growth is expected to decelerate in the coming months due to the lingering impact of new supply, stabilization is anticipated by Q2 2025. This recovery will be driven by a significant reduction in deliveries over the next 12 to 18 months, which should help stabilize occupancy rates and support healthier market dynamics.
Louisville’s relative affordability continues to be a key draw for renters, with the average rent of $1,189 significantly lower than in peer markets. This affordability, coupled with sustained inbound migration from higher-cost regions, ensures strong demand for rental properties in the area. As market conditions rebalance and occupancy stabilizes, rent growth is projected to improve, with the annual rate reaching 2.5% by the end of 2025. These factors position Louisville for steady improvement in its rental market, making it an attractive option for renters and investors alike.
12-month period ending November 2024
The Louisville multifamily market is poised for significant improvement in 2025, driven by a sharp decline in new supply and consistently strong renter demand. The market’s exposure to non-cyclical job sectors and a growing advanced manufacturing industry supports a positive long-term outlook. While near-term risks remain due to elevated deliveries, the steep drop in construction starts shifts risks to the upside in the longer term.
Construction activity slowed dramatically in 2024, with starts declining nearly 70%. This slowdown is expected to result in a substantial reduction in deliveries, with only about 1,300 units projected to come online in 2025—the lowest level since 2017. These cutbacks in new supply are anticipated to create more balanced market conditions and support occupancy stabilization, particularly as Louisville’s growing population continues to drive rental demand.
Demand is projected to remain strong, exceeding new completions in 2025 by nearly 10%, highlighting improved supply and demand fundamentals. Rent growth in Louisville is forecast to stay robust, with a 2.5% annual increase in 2025, outpacing the national benchmark. Despite this growth, the city’s average rent, projected to reach $1,218 by year-end, remains affordable compared to peer markets, making it an attractive option for renters relocating from higher-cost regions.
Overall, Louisville’s multifamily market is well-positioned for gradual improvement as reduced new supply, resilient renter demand, and relative affordability create a stable and appealing environment for investors seeking consistent returns in the near term.
