Spec industrial building has returned to Louisville. And Powell Spears, managing member and industrial group leader with the Louisville office of Cassidy Turley, said that the spec trend couldn’t have happened at a better time.
“Class-A industrial market vacancy rates are at historic lows in Louisville,” Spears said. “That has instigated some much-needed spec construction, which began in the second quarter of last year. The market needed these spec buildings. The demand for industrial in our market is high.”
Spears said that the Louisville market has delivered more than 2 million square feet of Class-A industrial space in the early part of this year and in late 2013. And that’s just the start of the industrial boom here. Another 2.5 million square feet – if all industrial being proposed is built – is in the pipeline.
“That’s a strong indication in the belief that Louisville will continue to be a strong inland port,” Spears said.
What’s behind Louisville’s industrial strength? The UPS Worldport is located at the Louisville International Airport. At the same time, the city is located within a two-day drive of 66 percent of the United States’ population.
Big companies have also committed to this market. Take Ford. The automaker runs the Louisville Assembly Plant adjacent to the airport, where it produces the Ford Escape. It also operates the Kentucky Truck Assembly plant in the Northeast corner of the city. Ford announced earlier this year an $80 million investment in this plant.
E-commerce users have been strong in Louisville, too. Amazon has steadily increased its footprint in the Louisville market as has eBay. Other major e-commerce players in the area include Nasty Gal and CafePress.
The Louisville market has also gotten a boost from Southern Indiana. This slice of Indiana is considered part of the Louisville market, and it has turned into in recent years a viable industrial market. The River Ridge Commerce Center in Jeffersonville, Ind., is a good example. This industrial park is thriving today, and providing additional energy to the overall Louisville industrial market.
The big question is whether developers will be able to fill all the new spec industrial construction planned for the market.
“Quite frankly, I’d like to see more actual activity,” Spears said. “There are plenty of deals percolating in the market. But these deals haven’t been made official yet. The companies behind this potential activity are often looking at other cities, too. We’re still competing for some of the industrial deals.”
Spears is a realist. He knows that because so much industrial is being built that the vacancy rate in this sector will rise, at least slightly, in 2014.
“I can see us absorbing a good chunk of the space, but if everything proposed is delivered, I don’t know if we can fill all of that volume,” Spears said.