$1,162 1Q 2024
3.9%
94.7% 1Q 2024
40 BASIS POINTS
6.4% (FEB 2024)
9.4% (FEB 2024)
* Please note that these employment figures have been adjusted for seasonal variations and are based on Moody’s Analytics forecast as of January 1, 2024.
** Please note that these unemployment rates are estimates that have not been adjusted for seasonal variations, and they are derived from Moody’s Analytics forecast as of January 1, 2024.
QUARTERLY DEMAND
QUARTERLY COMPLETIONS
In contrast to national trends, demand in Louisville has matched supply in recent months, leaving the market on firm ground as of early 2024. Over the past 12 months, net absorption has reached 2,500 units—28% above the average for the same period in the three years preceding the pandemic. As of the first quarter, the average occupancy rate stands at 94.7%, surpassing the national benchmark of 92.2%. Louisville’s affordability bolsters demand, especially for mid- and lower-tier properties, where renters are most affected by rising costs. While net absorption for lower-tier properties is negative nationally, it remains positive in Louisville.
In Louisville, new deliveries have reached near-record levels, with 2,700 units added to the market in the past 12 months. The majority of this new supply is concentrated in the Southern Indiana submarket, where inventory has expanded by 28% over the past five years, compared to a 17% increase at the market level. Development in Louisville is focused on areas that have seen some of the highest apartment demand in recent years. Southern Jefferson County and Southern Indiana, which include some of the fastest-growing communities in the region, together account for nearly half of all units under construction. Downtown Louisville and the East End contribute another 27% of the units currently being built.
Net absorption in Louisville accelerated through much of 2023 and kept pace with new deliveries, maintaining a balanced occupancy rate of 94.7% compared to the national benchmark of 92.7% at the close of the first quarter of 2024. Several factors are poised to sustain strong demand for rental units in Louisville. The concentration of higher education institutions provides market stability, as students and faculty drive consistent housing demand. Moreover, significant investments from companies like Toyota and other advanced manufacturers are generating new jobs, further boosting the need for housing as employees relocate to the region. Additionally, Louisville’s affordability appeals to prospective renters seeking a more economical alternative to markets with higher living costs.
Average Monthly Mortgage Payment
After slowing down in mid-2023, rent growth in Louisville has stabilized. While the national rent growth rate is 0.9%, Louisville’s gains are hovering around 4.0%. The market’s affordability, steady population growth, and relatively limited new supply over the past few years have contributed to a more gradual slowdown in rent growth compared to peer markets and the national average. In fact, rent growth in Louisville still surpasses the 10-year average of 3.4%. Submarkets with occupancy rates above the market average, like South Jefferson County, are experiencing particularly strong growth, with increases approaching 5%. Looking ahead, rent growth is expected to remain robust, with gains averaging over 3% annually for the next three years.
Average Monthly Rent
As of early 2024, investment activity in Louisville remains subdued. In the past 12 months, sales volume reached just over $170 million across 10 deals, marking the lowest total for this period since 2016. However, comparing only the first quarter of 2024 to the same period a year earlier, transaction volume quadrupled to $26.4 million across three deals. Institutional and private REIT investor activity, which typically makes up a small portion of the market, was absent entirely over the last five quarters. Instead, the buyer profile has shifted exclusively to individual buyers. This change is reflected in the types of assets being traded, with smaller properties dominating many of the top deals in recent months.
* Trailing 4Q average PPU
* Preliminary Data from RCA – Individual transaction $2.5M +
Please note that the income and expense data presented in this section is sourced from third-party providers. Our firm does not provide any warranty or guarantee as to the accuracy or reliability of this information. We recommend that users exercise their own discretion and professional judgment when interpreting and utilizing this data.
| Income Assumptions | Value / Unit | Year Change (%) |
|---|---|---|
| Rental Income / Occupied Unit | $1,143.21 | 7.0% |
| Recoverable Expenses / Occupied Unit | $80.91 | 13.7% |
| Other Income / Occupied Unit | $75.84 | 4.0% |
| Total Income / Occupied Unit | $1,299.96 | 7.2% |
| Rental Income | $1,065.87 | 7.7% |
| Recoverable Expenses | $75.44 | 14.5% |
| Other Income | $70.71 | 4.8% |
| Total Income | $1,212.02 | 7.9% |
| Operating Expenses | Value / Unit | Year Change (%) |
|---|---|---|
| Payroll | $126.83 | 6.7% |
| Repairs & Maintenance | $45.55 | 9.3% |
| Leasing | $56.86 | 6.1% |
| General | $24.42 | 3.1% |
| Marketing & Advertising | $18.32 | 16.6% |
| Repairs & Maintenance | $108.11 | 7.7% |
| Cleaning | $18.01 | 15.6% |
| Roads & Grounds | $19.00 | 2.0% |
| General | $71.09 | 7.7% |
| Administrative | $34.10 | 12.3% |
| Security | $3.73 | 32.9% |
| General | $30.37 | 10.1% |
| Management Fees | $44.99 | 8.7% |
| Utilities | $97.20 | -1.5% |
| Electric | $17.68 | -5.6% |
| Gas | $6.24 | -28.8% |
| Water/Sewer | $73.28 | 2.4% |
| Real Estate & Other Taxes | $119.62 | -3.1% |
| Insurance | $50.19 | 42.6% |
| Other Operating Expensees | $0.65 | |
| Total Operating Expense | $600.01 | 6.4% |
| Value / Unit | Year Change (%) | |
| Net Operating Income | $468.24 | 9.2% |
|---|
In the coming years, rent growth in Louisville is projected to remain robust, with gains averaging between 3% and 4% annually, outpacing the national average. Several factors continue to underpin strong rental demand. The concentration of higher education institutions stabilizes the market by sustaining housing demand from students and faculty. Moreover, significant investments from companies like Toyota and other advanced manufacturers are bringing new jobs to the region, further fueling the need for housing as employees relocate. Additionally, Louisville’s affordability could draw prospective renters seeking more economical living compared to higher-cost markets.
