MARKET SNAPSHOT
$1,196 3Q 2024
94.5% 3Q 2024
1,015 [YTD: 2,355]
3.4% 3Q 2024
+20 BASIS POINTS
1,496 [YTD: 3,430]
Demand continues to lag behind new completions, a trend that has persisted since mid-2023. However, net absorption jumped 45% between the second and third quarters of 2024, while deliveries only increased 13% during the same period.
Despite elevated levels of new construction and a record number of completions in 2024, the average occupancy rate has remained stable, suggesting ample pent-up demand has been able to absorb new supply as it comes online.
Average apartments rents continue to increase, and Louisville is ranked 6th among the top 50 rental markets in the U.S. for rent growth. However, rent gains in the most recent quarter were below the five-year average (4.6%), likely due to the impact of increased deliveries.
Rental demand in the Louisville multifamily market—measured by net absorption—continues to be outstripped by new completions but has recently spiked. After remaining relatively stable in the first half of 2024, net absorption jumped 45% in the current quarter, significantly outpacing the 13% rise in deliveries. Nevertheless, deliveries are on pace to exceed absorption in 2024, a reversal from 2023. New supply exceeded demand in both 2019 and 2022, yet the overall stabilized occupancy rate has increased over the past five years. These factors suggest that there may be more pent-up demand available to absorb the new supply than reported in CoStar absorption data.
Renter demand has been concentrated in the Southern Indiana submarket, which accounted for over a third of all units absorbed in the Louisville market over the past year. South Jefferson County followed closely, contributing 27% of the market’s total absorptions.
Deliveries in Louisville during the first three quarters of 2024 have reached a record high. The third quarter alone saw nearly 1,500 units delivered, the highest on record. Year-to-date, approximately 3,400 units have been added to the market, doubling the volume from the previous year. Despite this, the overall occupancy rate has remained largely unchanged, indicating strong pent-up demand. It is worth noting that the construction pipeline peaked at approximately 5,700 units by the end of 2023, with much of this new supply yet to come online. As a result, deliveries are expected to remain elevated through mid-2025.
The Southern Indiana submarket has been the focal point of new construction in the Louisville region, representing roughly 45% of all new unit deliveries over the past year. Growth in this area has been concentrated along the Interstate 65 corridor, particularly in the towns of Jeffersonville, Clarksville, and Sellersburg. This submarket continues to attract developers due to its strategic location and comparatively lower land costs.
Despite the continuance of above average deliveries, the average stabilized occupancy rate has remained relatively stable, fluctuating only between 92.6% and 95.4% over the past five years. The current rate of 94.5% aligns with the metro’s five-year average of 94.3% and remains marginally above the national benchmark of 94.0%. Several factors contribute to Louisville’s sustained rental demand. The city’s numerous higher education institutions provide a consistent influx of students and faculty, stabilizing demand for housing. Additionally, significant investments from major employers like UPS and advanced manufacturers are generating new job opportunities, attracting workers to Louisville.
In addition to seeing some of the highest rent growth in the metro area, Shelby and Spencer counties had the highest stabilized occupancy rates, at 98%. In contrast, Downtown Louisville was the worst-performing submarket with a 91% occupancy rate, followed closely by Southern Indiana. Across all property tiers, the average stabilized occupancy rate was 94% in the current quarter, reflecting the strong demand for rental unit types across the region.
Year-over-year rent growth in Louisville has slowed for the first time since mid-2023, yet it remains significantly above typical levels. Louisville continues to rank among the top ten major U.S. markets for rent growth, posting a 3.4% annual increase, compared to a national average of just 0.9%. Despite this strong performance, the rent growth recorded in the current quarter falls below the five-year average of 4.6%. This slowdown is likely attributed to the persistent high levels of new construction.
Limited deliveries and strong demand have driven impressive rent growth in Shelby and Spencer counties, where annual increases reached 8.5% and 7.4%, respectively. In contrast, the Southern Indiana submarket, which has seen the highest concentration of new construction, recorded a more modest rent gain of 2.1%. Across the Louisville metro area, only one submarket experienced a decline in rents over the past year. Upper-tier properties saw the lowest rent growth, at 2.5%, while both lower- and mid-tier properties reported stronger increases of 3.8%.
Louisville’s economy has seen substantial benefits from the rapid expansion of e-commerce, driven largely by the pandemic. This shift has led retailers and logistics providers to lease record amounts of warehouse and distribution space. The city’s strategic central location, mild climate, and access to key logistics infrastructure—three riverports, multiple rail lines, and eight regional airports—make it highly attractive to logistics tenants.
As of August 2024, total nonfarm employment in Louisville increased by 1.1% year-over-year, adding 7,800 jobs. The mining, logging, and construction sector led this growth, with a 4.2% increase. Education and healthcare followed closely, showing a 4.1% annual growth rate. However, the information and finance sectors experienced declines of 5.6% and 2.1%, respectively. Louisville’s unemployment rate currently stands at 4.5%, which is 90 basis points higher than both August 2023 and pre-pandemic levels, aligning closely with the national benchmark of 4.4%.
August 2024 ANNUAL JOBS CREATED
AUGUST 2024 EMPLOYMENT GROWTH
AUGUST 2024 Unemployment rate
4.4% us August rate
Nominal Change
from August 2023
to August 2024: 4,300
Percent Change: 4.1%
Nominal Change
from August 2023
to August 2024: 1,400
Percent Change: 4.2%
Nominal Change
from August 2023
to August 2024: 1,400
Percent Change: 0.9%
Nominal Change
from August 2023
to August 2024: 600
Percent Change: 0.7%
Nominal Change
from August 2023
to August 2024: 500
Percent Change: 1.9%
| Sector | Nominal Change from August 2023 to August 2024 | Percent Change |
|---|---|---|
| Education and Health Services | 4,300 | 4.1% |
| Mining, Logging, and Construction | 1,400 | 4.2% |
| Trade, Transportation, and Utilities | 1,400 | 0.9% |
| Professional and Business Services | 600 | 0.7% |
| Other Services | 500 | 1.9% |
| Government | 400 | 0.6% |
| Manufacturing | 400 | 0.5% |
| Leisure and Hospitality | 200 | 0.3% |
| Information | -500 | -5.6% |
| Financial Activities | -1,000 | -2.1% |
Canadian Solar is developing a large solar photovoltaic cell manufacturing plant at the River Ridge Commerce Center in Jeffersonville, IN, located just across the Ohio River from Louisville.
With the rise of eCommerce and growth of international shipping, UPS is expanding its Louisville Worldport facility to accommodate future freight growth. The expansion, which started in 2022 and is expected to be completed in 2025.
In early 2024, EnerVenue, a California-based company specializing in non-lithium-ion battery technology, began production at a 1-million-square-foot gigafactory for metal-hydrogen batteries in Shelby County, Kentucky.
The Louisville rental market has consistently outperformed both regional peers and the national average in terms of occupancy and rent levels. Although construction deliveries remain high, the overall occupancy rate is expected to remain stable through 2025. This stability is largely due to the recent increase in absorptions, which are projected to remain relatively balanced with new completions in the coming year.
The extensive development pipeline is anticipated to influence average rent growth, with forecasts suggesting a decline to around 2% annually in early 2025 before rebounding to 4% by the end of the year, aligning with the five-year trend. The ongoing trend of high inbound migration is expected to persist, as households nationwide seek more affordable housing markets in the Midwest that offer ample job opportunities, cultural attractions, and quality-of-life amenities, such as those found in Louisville.
Sources: Costar; ESRI; U.S. Census Bureau; Yardi Matrix; U.S. Bureau of Labor Statistics
