More Related Content Similar to JLL Louisville Office Outlook - Q1 2017 (18) More from Ross Bratcher (9) JLL Louisville Office Outlook - Q1 20172. © 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
The verdict Louisville had been waiting for was delivered in the first quarter as
a federal court ruling blocked the Humana and Aetna merger. With about
12,500 local employees Humana is one of the largest employers in Louisville
and has an even greater presence regarding real estate with a significant
footprint of both leased and owned office space. Efficiencies from the deal
would have likely resulted in job losses and further consolidation of
Humana’s office space in Louisville to their locations downtown.
The Louisville market saw positive leasing activity through in the first quarter,
in addition to two large national wins for the market. National site selection
searches led Diversified Consultants to sign a lease for 40,000 square feet,
while Ernst & Young announced their intent to find space for 125 employees in
the Central Business District. Local players such as Scoppechio and Atria
Senior Living signed a 41,000-square-foot lease and a 16,000-square-foot
expansion respectively driving activity in the Central Business District. This
uptick in leasing activity further solidifies the strength of the Louisville office
market to grow organically through the local business community as well as
attract new-to-market tenants.
Outlook
With a strong start to 2017, the Louisville office market looks well positioned
to build off the momentum and deliver a robust 2017. As tenants in the
market continue to grow alongside an improving economy, the Class A office
market is projected to tighten in both suburban and downtown submarkets.
As this trend leads to more available of space in Class B assets, the market will
continue to favor tenants as more affordable options become available. This
pattern will make Louisville an attractive option for call centers and business
services users such as the two significant announcements made in the first
quarter by Diversified Consultants and Ernst & Young. Overall the market is
poised for a healthy 2017.
Fundamentals Forecast
YTD net absorption 93,947 s.f. ▲
Under construction 132,500 s.f. ▲
Total vacancy 10.4% ▼
Average asking rent (gross) $17.55 p.s.f. ▲
Concessions Falling ▼
-100,000
100,000
300,000
500,000
2013 2014 2015 2016 YTD
2017
Supply and demand (s.f.) Net absorption
Deliveries
National site selection wins, organic growth drive
leasing in first quarter
13.6% 13.1% 12.8% 12.2%
10.4%
2013 2014 2015 2016 2017
Total vacancy
$10.00
$15.00
$20.00
$25.00
2013 2014 2015 2016 2017
Average asking rents ($/s.f.) Class A
Class B
• The first quarter saw two significant leasing announcements when two
national location searches selected Louisville for their operations.
• Two new speculative projects located in Northeast entered the
development pipeline, continuing the trend of development in that area.
• Multiple tenants relocating in the first quarter sought new space through
acquisitions of existing buildings as well as constructing their own.
Louisville Office Outlook
3. © 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.
Class
Inventory
(s.f.)
Total net
absorption
(s.f.)
YTD total net
absorption
(s.f.)
YTD total net
absorption
(% of stock)
Direct
vacancy (%)
Total
vacancy (%)
Average
direct asking
rent ($ p.s.f.)
YTD
completions
(s.f.)
Under
construction
(s.f.)
CBD Totals 9,881,814 -8,705 -8,705 -0.1% 9.0% 9.2% $17.03 0 0
Hurstbourne Totals 3,314,538 23,370 23,370 0.7% 10.7% 11.3% $19.88 0 0
Middletown/Eastpoint Totals 1,481,221 -20,314 -20,314 -1.4% 10.6% 10.6% $19.62 127,500 32,500
Plainview Totals 1,661,203 61,400 61,400 3.7% 15.1% 15.1% $15.29 0 0
River Road/Brownsboro Totals 723,205 13,780 13,780 1.9% 8.5% 9.6% $22.16 0 100,000
South Central Totals 1,406,623 24,416 24,416 1.7% 9.3% 11.6% $17.55 0 0
Southeast Totals 514,962 -36,986 -36,986 -7.2% 20.9% 20.9% $17.98 0 0
St. Matthews Totals 1,332,933 24,914 24,914 1.9% 7.0% 7.0% $17.55 0 35,000
Suburban Totals 8,586,790 102,652 102,652 1.2% 11.1% 11.8% $17.98 127,500 132,500
Louisville Totals 18,468,604 93,947 93,947 0.5% 10.0% 10.4% $17.55 127,500 132,500
CBD A 4,295,069 -12,033 -12,033 -0.3% 11.9% 12.2% $19.03 0 0
Hurstbourne A 2,705,365 20,959 20,959 0.8% 9.7% 10.5% $21.55 0 0
Middletown/Eastpoint A 930,892 -15,075 -15,075 -1.6% 13.4% 13.4% $20.26 127,500 32,500
Plainview A 504,033 0 0 1.4% 0.0% 0.0% $18.87 0 0
River Road/Brownsboro A 577,426 8,342 8,342 0.0% 9.9% 11.3% $22.69 0 100,000
Southeast A 460,734 -3,986 -3,986 -0.9% 13.2% 13.2% $21.32 0 0
St. Matthews A 712,694 1,655 1,655 0.2% 5.7% 5.7% $20.12 0 35,000
Suburban A 4,213,683 14,226 14,226 0.3% 10.6% 11.2% $21.32 127,500 35,000
Louisville A 8,508,752 2,193 2,193 0.0% 11.3% 11.7% $20.12 127,500 132,500
CBD B 5,586,745 3,328 3,328 0.1% 6.7% 6.9% $14.31 0 0
Hurstbourne B 609,173 2,411 2,411 0.4% 14.9% 14.9% $14.94 0 0
Middletown/Eastpoint B 550,329 -5,239 -5,239 -1.0% 5.8% 5.9% $17.28 0 0
Plainview B 1,661,203 61,400 61,400 3.7% 15.1% 15.1% $15.29 0 0
River Road/Brownsboro B 145,779 5,438 5,438 3.7% 3.1% 3.1% $15.50 0 0
Southeast B 1,406,623 24,416 24,416 1.7% 9.3% 11.6% $14.76 0 0
South Central B 54,228 -33,000 -33,000 -60.9% 87.0% 87.0% $15.30 0 0
St. Matthews B 620,239 23,259 23,259 3.8% 5.7% 8.5% $14.91 0 0
Suburban B 4,373,107 88,426 88,426 2.0% 11.6% 12.4% $15.30 0 0
Louisville B 9,959,852 91,754 91,754 0.9% 8.9% 9.3% $14.91 0 0
Q1 2017
Statistics
Louisville Office Outlook
4. © 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 sales over the last 12 months.
$370,206,519
17
$93
-
68.2%
31.8%
6.5-7.5% 0 - $0
6.5-7.5% 0.0% 17 $185,103,260
Notable sales transactions
RBA (s.f.) $ p.s.f. Sale date
211,236 $227 Jun-16
234,292 $90 Oct-16
208,906 $99 Dec-16
137,932 $100 Jun-16
98,933 $100 Jun-16
64,767 $143 Jun-16
102,460 $90 Oct-16
33,524 $227 Jun-16
33,080 $227 Jun-16
133,700 $47 Dec-16
Transactions details
Number of partial interest
transactions
Core Class A CBD
Core Class A suburban
Number of domestic
buyers
Foreign capital
Average partial interest
acquired
Number of foreign
buyers
Domestic capital
Average Class A price p.s.f.
Sales activity by building class12 months at a glance
YTD sales volume
Number of transactions
Average Class A cap rate
Sales volume $ by submarket
Urban sales volume as % of
total
Suburban sales volume as %
of total
Cap rate range
Physicians Realty Trust Catholic Health Initiatives $47,910,534
Building Buyer Seller Sale price ($)
Jewish Outpatient Care
Jewish Medical Plaza II
Hurstbourne Place
Spring River Business Park
Jewish Medical Center East
$9,280,000
Hurstbourne Park Viking Partners Tier REIT $9,200,000
Top buyers (s.f.)
Landmark Building Global X Tax Asset Solutions Blue Equity $6,283,900
St Mary's Caritas Medical III Physicians Realty Trust Catholic Health Initiatives $7,609,948
St Mary Caritas Medical II Physicians Realty Trust Catholic Health Initiatives $7,509,160
St Mary Caritas Medical I Physicians Realty Trust Catholic Health Initiatives
$21,100,000
$20,600,000
$13,815,977
$9,909,637
Top sellers (s.f.)
Physicians Realty Trust
Physicians Realty Trust
The Hocker Group
Viking Partners Tier REIT
Paul J Bickel
Catholic Health Initiatives
Catholic Health Initiatives
36%
19%
12%
8%
8%
7%
3%3%3%2%0%
Physicians Realty Trust
Viking Partners
The Hocker Group
Market Street Partners
Global X Tax Asset Solutions
Capital Investment Group
Fetzer Lofts LLC
Statewide Mortgage
36%
19%
12%
8%
8%
7%
3%3%3%2%
Catholic Health Initiatives
Tier REIT
Paul J Bickel
First Trust Restoration Partners
Blue Equity
$7,890,625
$20,600,000
$24,399,108
$30,300,000
$50,163,953
$51,749,574
Middletown/
Eastpoint
River Road/
Brownsboro
South Central
Hurstbourne
CBD
St. Matthew's
$50,900,000
$134,203,260
$185,103,260
$0
$40,000,000
$80,000,000
$120,000,000
$160,000,000
$200,000,000
A B Total
Q1 2017
Sales
Louisville Office Outlook
36%
19%
12%
8%
8%
7%
10%
Physicians Realty Trust Viking Partners
The Hocker Group Market Street Partners
Global X Tax Asset Solutions Capital Investment Group
Other
36%
19%
12%
8%
8%
7%
10%
Catholic Health Initiatives Tier REIT
Paul J. Bickel First Trust Restoration Partners
Blue Equity Physician Realty Trust
Other
5. © 2017 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof.
This report analyzes all office developments under construction & new deliveries in the last 12 months > 30,000 s.f.
Total available at delivery (%) 29.1%
Total leased at delivery (%) 60.9%
Average floor plate (s.f.) 24,727
Average number of stories 3
Average asking rent ($ p.s.f.) $24.25
Notable deliveries past 12 months
Building Submarket RBA (s.f.) Delivered
Leased at
delivery (%)
500 N Hurstbourne 120,000 Q2 2016 33.0%
2403 Terra Crossing Blvd 92,500 Q1 2017 100.0%
295 Hubbards Lane 45,000 Q3 2016 22.0%
12450 Lake Station Place 38,400 Q2 2016 75.0%
Old Henry Crossing #5 35,000 Q1 2017 87.7%
Total pre-leased (%) 0.0%
Total under construction (s.f.) 132,500
Total under renovation (s.f.) -
Average floor plate (s.f.) 28,750
Average asking rent ($ p.s.f.) $21.50
Notable projects under construction
Building RBA (s.f.)
Estimated
delivery
Pre-leased
(%)
5000 Chamberlain Lane 100,000 Q2 2018 0.0%
Eastpoint Centre 32,500 Q2 2017 0.0%
Middletown/Eastpoint
Hurstbourne
St. Matthews
Middletown/Eastpoint
Middletown/Eastpoint
SpeculativeThe Schroering CompanyMiddletown/Eastpoint
River Road/Brownsboro McMahan Group Speculative
Owner/developer Spec or BTSSubmarket
Under construction/renovation
132,500
Under construction/renovation (s.f.)
At a glance
Upcoming deliveries by year (s.f., excludes YTD completions)
Spec/BTSOwner/developer
BTS
SpeculativeUofL Foundation
Main Street Realty
Speculative
BTSThortons
Speculative
Hoagland Commercial
Terra Crossing, LLC
Historical completions
Deliveries
At a glance
330,900
12-month deliveries (s.f.)
32,500
100,000
0
20,000
40,000
60,000
80,000
100,000
120,000
2017 2018
175,000
260,000
248,000
328,400
127,500
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
2013 2014 2015 2016 2017
Q1 2017
Construction
Louisville Office Outlook
6. © 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 Office Outlook
Delivered: Q2 2016 Est. Delivery: Q3 2017
Address: 500 N. Hurstbourne
Square feet: 125,000
Tenant: Multiple
Owner: NTS Development
Address: 3205 Eastpoint Centre
Square feet: 32,500
Tenants: TBD
Owner: The Schroering Company
Est. Delivery: Q1 2018
Address: Old Brownsboro Crossing
Square feet: 100,000
Tenant: TBD
Owner: The McMahan Group
7. © 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 Office 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
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)
8. © 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 Batson
Vice President, Director of Research
+1 216 937 4374
andrew.batson@am.jll.com
Ross Bratcher
Research Analyst
+1 513 719 3706
ross.bratcher@am.jll.com
About JLL
JLL (NYSE: JLL) is a leading professional services firm that
specializes in real estate and investment management. A
Fortune 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
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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
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unrivalled local and global perspectives. Our research and
expertise,
fueled by real-time information and innovative thinking
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our clients and drives successful strategies and optimal
real estate decisions.