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JLL Louisville Industrial Outlook - Q1 2019
- 1. Industrial Outlook An in-depth look at the Louisville industrial market. Analysis includes leasing, sales, construction and employment. Louisville | Q1 2019 JLL Research
- 2. © 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 2019 Insight Louisville Industrial Outlook The year is off to a strong start as the pace of absorption in 2018 continued into 2019 with over 2.1 million square feet absorbed. UPS leased nearly 868,000 square feet across two buildings in the Airport submarket. Ford leased the remaining 302,000 square feet of the building at 10301 Air Commerce Drive, after initially taking down 370,000 square feet last fall. Hydra made the largest lease of the quarter, taking the 505,000-square-foot Exeter building in River Ridge. As expected, speculative construction completions slowed significantly to start the year as development tapered off in mid- to-late 2018. However, announcements have picked back up with Browning planning a 925,000- squre-foot building in Bullitt County, Exeter planning a 561,600-square-foot building in Southern Indiana, and Main Street Realty planning a 331,000- square-foot building in the Airport submarket. This quarter was also active on the investor side with 3208 E. Blue Lick Road transferring to Dream Industrial REIT and 857 Park Loop Road transferring to Colony Capital. Both acquisitions were part of larger portfolio packages. Louisville remains a desirable location for institutional investors who have been priced out of larger markets, with several buildings currently under contract providing attractive returns for investors. Outlook The pace of absorption over the past 12-months has been historic for Louisville with over 7.0 million square feet leased. The surge in absorption has ignited interest in speculative development opportunities. Given the current availabilities and development announcements, there continues to be intriguing options for users evaluating the Louisville market. Fundamentals Forecast YTD net absorption 2,157,300 s.f. ▼ QTD net absorption 2,157,300 s.f. ▼ Under construction 3,470,640 s.f. ▼ Total vacancy 7.02 % ▼ Average asking rent (NNN) $3.95 p.s.f. ▲ Tenant improvements Falling ▼ 0 4,000,000 8,000,000 2015 2016 2017 2018 2019 Supply and demand (s.f.) Net absorption Deliveries Absorption remains strong as vacancy continues to fall 5.7% 8.7% 11.7% 9.4% 7.0% 2015 2016 2017 2018 2019 Total vacancy $3.20 $3.40 $3.60 $3.80 $4.00 2014 2015 2016 2017 2018 2019 Average asking rents ($/s.f.) © 2019 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. Top trends and activity • Dream Industrial REIT and Colony Capital entered the Louisville market in Bullitt County, as part of separate portfolio packages. • UPS leased two buildings totaling over 850,000 square feet in the Airport submarket. • Modern bulk vacancy dipped to 7.02 percent, the lowest mark since 2015.
- 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. Inventory (s.f.) YTD total net absorption (s.f.) YTD total net absorption (% of inventory) Total Vacancy (%) Average total asking rent ($ p.s.f.) YTD completions (s.f.) Under construction (s.f.) Airport 24,121,751 1,289,500 5.3% 3.6% $4.11 129,000 468,000 Bullitt County 13,647,026 0 0.0% 10.2% $4.09 0 572,000 East 5,850,720 0 0.0% 0.0% $5.95 0 150,040 Riverport 12,557,133 362,800 2.9% 9.2% $3.56 230,000 0 Southern Indiana 10,216,172 505,000 4.9% 12.2% $3.85 0 2,280,600 Louisville Totals 66,392,802 2,157,300 3.2% 7.2% $3.95 359,000 3,470,640 Analyzes all industrial buidings greater than 100,000 s.f. with a minimum clear height of 24' 2,234,648 1,934,181 2,059,001 2,742,889 3,029,702 3,843,783 2,568,298 5,710,124 2,157,300 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 2011 2012 2013 2014 2015 2016 2017 2018 Q1 2019 Q1 2019 Statistics Louisville Industrial Outlook 9.2% 8.3% 7.2% 6.6% 5.7% 8.7% 11.7% 9.4% 7.0% 2.0% 5.0% 8.0% 11.0% 14.0% 2011 2012 2013 2014 2015 2016 2017 2018 Q1 2019 © 2019 Jones Lang LaSalle IP, Inc. All rights reserved. All information contained herein is from sources deemed reliable; however, no representation or warranty is made to the accuracy thereof. Total Vacancy Rate % Total Net Absorption Inventory (s.f.) YTD total net absorption (s.f.) YTD total net absorption (% of inventory) Total Vacancy (%) Average total asking rent ($ p.s.f.) YTD completions (s.f.) Under construction (s.f.) Airport 24,121,751 1,289,500 5.3% 3.6% $4.11 129,000 468,000 Bullitt County 13,647,026 0 0.0% 10.2% $4.09 0 572,000 East 5,850,720 0 0.0% 0.0% $5.95 0 150,040 Riverport 12,557,133 362,800 2.9% 9.2% $3.56 230,000 0 Southern Indiana 10,216,172 505,000 4.9% 12.2% $3.85 0 2,280,600 Louisville Totals 66,392,802 2,157,300 3.2% 7.0% $3.95 359,000 3,470,640 Analyzes all industrial buidings greater than 100,000 s.f. with a minimum clear height of 24'
- 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. $187,037,809 10 $68 5.75%-6.25% 98.5% 2.5% Top sales transactions last 12 months Size (s.f.) $ p.s.f. Sale date 2621 Technology Drive WPT Industrial REIT WPT Capital Advisors 224,000 $17,900,000 $80 Sep-18 120 Velocity Way Granite Capital Browning 721,000 $68 Dec-18 7251 Logistics Drive Paul & Eleanor Sade Trust Panattoni 356,000 $66 May-18 250 Hilton Drive GLP Van Trust 592,800 $38,400,000 $65 Apr-18 857 Park Loop Road* Colony Capital Dermody 546,000 $26,489,801 $47 Feb-19 Dream Industrial REIT Transwestern 302,500 $13,491,668 $45 Feb-19 1234 Gardiner Lane GSK Properties 162,000 $4,610,000 $28 Dec-18 Sales price $ 12 month sales volume $ by submarket $48,696,340 *Purchased as part of portfolio Dry Ridge Capital $23,500,000 3208 E. Blue Lick Road* Building address Buyer company Transactions details Seller company Average Class A sale price p.s.f. 12 month transaction volume at a glance Total volume Number of transactions Average Class A cap rate Sales activity by building type last 12 months Warehouse/Dist. sales volume as % of total Manufacturing sales volume as % of total Top sellers (s.f.)Top buyers (s.f.) $182,287,809 $4,750,000 0 s.f. 500,000 s.f. 1,000,000 s.f. 1,500,000 s.f. 2,000,000 s.f. 2,500,000 s.f. 3,000,000 s.f. 3,500,000 s.f. $0 $50,000,000 $100,000,000 $150,000,000 $200,000,000 Warehouse / Distribution Manufacturing Sum of Price ($) Sum of RBA (SF) 20% 16% 15%13% 10% 8% 6% Granite GLP Colony Capital Sazerac Paul & Eleanor Sade Trust Dream Industrial REIT WPT Industrial REIT GSK Properties Sperber Familly Trust Greif 20% 16% 15%13% 10% 8% 6% Browning Van Trust Dermody New Mill Capital Holdings Panattoni Transwestern WPT Capital Advisors Dry Ridge Capital Atalaya Investments Alemap $88,677,809 $43,150,000 $27,200,000 $17,900,000 $10,110,000 Bullitt County Southern Indiana Riverport East Airport Q1 2019 Sales Louisville Industrial Outlook This report analyzes all industrial sales > 75,000 s.f. year-to-date © 2019 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. $187,037,809 10 $68 5.75%-6.25% 98.5% 2.5% Top sales transactions last 12 months Size (s.f.) $ p.s.f. Sale date 2621 Technology Drive WPT Industrial REIT WPT Capital Advisors 224,000 $17,900,000 $80 Sep-18 120 Velocity Way Granite Capital Browning 721,000 $68 Dec-18 7251 Logistics Drive Paul & Eleanor Sade Trust Panattoni 356,000 $66 May-18 250 Hilton Drive GLP Van Trust 592,800 $38,400,000 $65 Apr-18 857 Park Loop Road* Colony Capital Dermody 546,000 $26,489,801 $47 Feb-19 Dream Industrial REIT Transwestern 302,500 $13,491,668 $45 Feb-19 1234 Gardiner Lane GSK Properties 162,000 $4,610,000 $28 Dec-18 Sales price $ 12 month sales volume $ by submarket $48,696,340 *Purchased as part of portfolio Dry Ridge Capital $23,500,000 3208 E. Blue Lick Road* Building address Buyer company Transactions details Seller company Average Class A sale price p.s.f. 12 month transaction volume at a glance Total volume Number of transactions Average Class A cap rate Sales activity by building type last 12 months Warehouse/Dist. sales volume as % of total Manufacturing sales volume as % of total Top sellers (s.f.)Top buyers (s.f.) $182,287,809 $4,750,000 0 s.f. 500,000 s.f. 1,000,000 s.f. 1,500,000 s.f. 2,000,000 s.f. 2,500,000 s.f. 3,000,000 s.f. 3,500,000 s.f. $0 $50,000,000 $100,000,000 $150,000,000 $200,000,000 Warehouse / Distribution Manufacturing Sum of Price ($) Sum of RBA (SF) 20% 16% 15%13% 10% 8% 6% Granite GLP Colony Capital Sazerac Paul & Eleanor Sade Trust Dream Industrial REIT WPT Industrial REIT GSK Properties Sperber Familly Trust Greif 20% 16% 15%13% 10% 8% 6% Browning Van Trust Dermody New Mill Capital Holdings Panattoni Transwestern WPT Capital Advisors Dry Ridge Capital Atalaya Investments Alemap $88,677,809 $43,150,000 $27,200,000 $17,900,000 $10,110,000 Bullitt County Southern Indiana Riverport East Airport
- 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. Total leased at delivery (%) 2.7% Total speculative at delivery (s.f.) 2,436,815 Total BTS at delivery (s.f.) 481,000 Total owner-user at delivery (s.f.) 1,300,000 Total # of properties delivered 11 Asking rental rate (low - high) $4.25 - $5.50 Largest projects delivered past 12 months Building/Address RBA (s.f.) Delivery date Leased at delivery (%) W.W. Grainger 1,300,000 Q3 2018 100% 10301 Air Commerce Drive 677,685 Q2 2018 0% 300 Hilton Drive 506,117 Q3 2018 0% 4500 Fern Valley Road 350,000 Q3 2018 0% 2349 E. Millers Lane 251,000 Q4 2018 100% 101 Lewman Way 250,000 Q4 2018 0% Total pre-leased (%) 25.0% Total speculative under construction (s.f.) 1,583,640 Total BTS under construction (s.f.) - Total Owner-user under construction (s.f.) 1,887,000 Total # of properties UC 8 Asking rental rate (low - high) $3.90 - $4.15 Largest projects currently under construction Building RBA (s.f.) Delivery date Pre-leased (%) Salt River Business Park 572,000 Q3 2019 0% Exeter River Ridge 561,600 Q4 2019 0% Logistics River Ridge 469,000 Q2 2019 100% Premier Packaging 318,000 Q2 2019 100% Eastpoint Business Center B 150,040 Q1 2019 21% Speculative Speculative Owner-user Submarket Under construction 3,470,640 Under construction (s.f.) Under construction in-depth Upcoming deliveries by year (s.f., excludes YTD completions) Southern Indiana Gray Speculative New and historical deliveries Completions in-depth 4,217,815 Total delivered past 12 months (s.f.) Construction typeOwnerSubmarket Airport Airport Southern Indiana Airport Airport Advance Distribution Services The Schroering Co. Exeter Property Group Molto W.W. Grainger BTS Speculative East Airport Southern Indiana Southern Indiana Bullitt County Speculative Owner-user Owner Construction type Owner-user Boland Premier Packaging Niagara Bottling Exeter Property Group Crossdock Dev. Speculative Speculative 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 2012 2013 2014 2015 2016 2017 2018 2019 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 2019 Owner-user Speculative Q1 2019 Construction Louisville Industrial Outlook This report analyzes all industrial developments under construction & new deliveries > 100,000 s.f. © 2019 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.
- 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 2019 Construction Louisville Industrial Outlook 1 Location: 100 Velocity Way Square feet: 925,000 Tenant(s): None Landlord: Browning 1 2 Address: 4301 Produce Road Square feet: 318,000 Tenant(s): Owner-user Landlord: Premier Packaging 2 3 Location: 350 Hilton Drive Square feet: 561,600 Tenant(s): None Landlord: Exeter 3 4 Address: Logistics Avenue Square feet: 469,000 Tenant(s): Owner-user Landlord: Niagara Bottling 4 © 2019 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.
- 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. 22% 15% 13%12% 11% 10% 7% Trade, Transportation & Utilities Educational & Health Services Professional & Business Services Manufacturing Government Leisure & Hospitality Financial Activities Mining, Logging & Construction Other Services Information Q1 2019 Employment Louisville Industrial Outlook 3.8%U.S. unemployment 1.7%U.S. 12-month job growth 4.0%Louisville unemployment 1.0%Louisville 12-month job growth 4.1%Kentucky unemployment 1.1%Kentucky 12-month job growth -3.0 2.0 7.0 12.0 17.0 22.0 2014 2015 2016 2017 2018 Trade, Transportation & Utilities Manufacturing Other Services Mining Logging & Construction 0% 4% 8% 12% 400,000 500,000 600,000 700,000 800,000 2014 2015 2016 2017 2018 2019 Employment Unemployment Employment vs. unemployment rate Employment by industry Job growth (12-month change) -2,600 -2,200 -500 -400 100 600 900 2,100 2,600 6,300 -4,500 -2,500 -500 1,500 3,500 5,500 7,500 Leisure & Hospitality Other Services Financial Activities Information Professional & Business… Government Trade, Transportation & Utilities Manufacturing Mining, Logging & Construction Educational & Health Services Job growth* Historical employment Job growth by sector* Employment by industry Industrial employment* * Represents 12-month change in employment. All charts represent the latest economic data available from the Bureau of Labor Statistics as of September 2018. © 2019 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. -1.0% -0.3% 0.4% 1.1% 1.8% 2.5% 3.2% 3.9% 2015 2016 2017 2018 Louisville U.S.
- 8. Andrew Batson Vice President, Director of Research +1 216 937 4374 [email protected] Alex Westcott Research Analyst +1 502 394 2504 [email protected] About JLL JLL (NYSE: JLL) is a leading professional services firm that specializes in real estate and investment management. Our vision is to reimagine the world of real estate, creating rewarding opportunities and amazing spaces where people can achieve their ambitions. In doing so, we will build a better tomorrow for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $16.3 billion, operations in over 80 countries and a global workforce of over 90,000 as of December 31, 2018. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com About JLL Research JLL’s research team delivers intelligence, analysis and 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 future conditions in over 60 countries, producing unrivalled local and global perspectives. Our research and expertise, fueled by real-time information and innovative thinking around the world, creates a competitive advantage for our clients and drives successful strategies and optimal real estate decisions. © 2018 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.