MARKET INSIGHT LOUISVILLE, KENTUCKY MULTIFAMILY REPORT THIRD QUARTER 2018

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1 CUSHMAN & WAKEFIELD COMMERCIAL KENTUCKY LOUISVILLE MULTIFAMILY RESEARCH MARKET INSIGHT MULTIFAMILY REPORT THIRD QUARTER 218 The Cushmn & Wkefield Commercil Kentucky Multifmily Reserch Tem, long with Integr Relty Reserch, provides in-depth coverge of the Louisville Metropolitn Sttisticl Are. In ddition to nlyzing multifmily rent nd sle trends, these reports exmine employment dt, key economic nnouncements, nd development pipeline news. IN THIS EDITION RESEARCH & SALES TEAM CRAIG COLLINS SENIOR DIRECTOR MIKE KEMETHER VICE CHAIR, MULTIFAMILY ADVISORY GROUP

2 Third Qurter LOUISVILLE METRO AREA EMPLOYMENT & UNEMPLOYMENT TRENDS As of the end of September 218, unemployment rtes in the Louisville re experienced decrese from 3.9% (s of Q1 218) to 3.7%. Louisville s unemployment rte is in line with the ntionl verge, which ws 3.7% for the sme period. ECONOMIC EXPANSION The following re select nnouncements from third qurter 218: Wlmrt is investing $41M to crete new e-commerce fulfillment center in Bullitt County. This new fcility is expected to bring 4 full-time jobs to the re. Rdil, the leder in omnichnnel commerce technology nd opertions, nnounced 1 new full-time jobs t their Bullitt County fulfillment center. LOUISVILLE JOB GROWTH TRENDS EMPLOYMENT IN THOUSANDS Q4 Q1 Q2 Q Source: Cushmn & Wkefield Commercil Kentucky Tier3 Technologies, LLC plns to relocte its Louisville hedqurters nd expnd its workforce in Louisville. The expnsion will involve cpitl investment of more thn $2.4M nd will dd 62 full-time jobs. UPS is plnning $3.8M expnsion t its Supply Chin Solutions cmpus. The investment is expected to crete 135 jobs for the wrehousing nd distribution rm of the firm. New Flyer of Americ hs strted opertions t its new Bullitt County plnt. Since moving into the $4M spce in the spring, New Flyer hs hired 58 employees to fill the first of 55 jobs they pln to dd. Szerc Brnds, LLC will be opening new distillery in the former Pillsbury Plnt in New Albny. This $66M project will crete 11 new jobs. Snt Ros Systems is plnning mjor expnsion of its Mt. Wshington fcility. The $21M expnsion is expected to crete 3 jobs during the next 1 yers. JOB GROWTH & UNEMPLOYMENT RATE % YOY BPS YOY Averge Q3 employment incresed by 1,14 jobs. Averge Q3 unemployment decresed to 3.7%. Q1 217 Q1 218 Q3 218 GMP (% Chnge) -3.3% 1.6% 2.% EMPLOYMENT (% Chnge) 1.%.%.% UNEMPLOYMENT RATE (%) 4.7% 3.9% 3.7% Source: Bureu of Lbor Sttistics

3 Third Qurter MULTIFAMILY TRENDS Midwest Rel Estte News reported in September 218, tht Louisville is one of the Midwest cities seeing big swings in prtment rents jumping 6.1% from August to September. Occupncy rtes re t 96.5% overll. This is down 1.5% from April 218 occupncy rtes of 96.5%. Highest submrkets re Are 1 (t 98%) nd Are 8 (t 98%). Averge rents for 1 BR units re t $797/mo. with verge rents for 2 BR units t $923/mo. While rentl rtes throughout the Louisville Metro re up slightly, rtes for both 1 nd 2 BR unit rentls should continue to rise. 95% Averge Occupncy decrese of 1.5% from 4/218 4% nd 6% Respective Averge Rentl Rte for 1 nd 2 BR units from 1/217 HISTORICAL & FORECASTED METRO RENT GROWTH RATES Averge effective rents in the Louisville Metro mrket hve grown from $936/mo. in Q1 218 to $957/mo. in Q These rents re forecst to see modest increses into 219. LOUISVILLE RENT GROWTH RATES DEVELOPMENT / INVENTORY 2,467 units were completed in the lst 12 months, nd over 2,4 units re currently under construction in the Louisville Metro re. Additionlly, over 6,7 units re plnned throughout the Metro re, with four submrkets plnning over 1, units ech. Those submrkets re Are 2 (with 1,48 units plnned), Are 8 (with 1,14 units plnned), Are 5 (with 1,97 units plnned) nd Are 7 (with 1,89 units plnned). DEMOGRAPHIC FUNDAMENTALS The MSA popultion is projected to grow by 18% between 21 nd 24. The projected gin of households is 21% for the sme period. POPULATION PERCENT RENTER HOUSEHOLDS 2: 1,25,598 21: 1,235,78 216: 1,293, : 1,32,6 Current%: 34.2 Current #: 171,625 4.% 3.5% 3.% 3.4% 3.67% 2.86% 2.73% 2.78% MEDIAN HOUSEHOLD INCOME Current: $54, % 2.% 1.5% 1.%.5% 1.6% MULTIFAMILY FORECAST The following re Cushmn & Wkefield s projections over the ner term:.% Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q3 '18 RENTS VACANCY PIPELINE % GROWTH Source: AXIOMetrics Forecst is 12-month outlook

4 Third Qurter INVESTMENT ACTIVITY Multifmily investment ctivity for Q3 218 in the Louisville MSA is down slightly, lthough there is still number of lrge trnsctions in the mrket. Regionl nd ntionl prtment funds hve been the lrgest ctive plyers for cquiring multifmily in the Louisville mrketplce in 218. Privte cpitl lso continues to ply mjor role in the B & C mrket. HISTORICAL SALES VOLUME $6 $5 $4 $3 $2 $1 $ Source: Rel Cpitl Anlytics, Commercil Kentucky Cushmn & Wkefield Reserch PRICING & CAP RATES The mrket s mid-qurtile spred is 5.8% to 5.9%, which is down slightly from the lst qurter. 8.% 7.% 6.% 5.% 4.% 3.% 2.% 1.%.% 9/1/214 12/1/214 3/1/215 6/1/215 9/1/215 12/1/215 Avg Cp Rte 3/1/216 6/1/216 9/1/216 12/1/216 3/1/217 6/1/217 9/1/217 12/1/217 3/1/218 6/1/218 9/1/218 NOTABLE SALES Clss A Jefferson Development Group sold Vinings t Hurstbourne (159 units) to Spirit Investment Prtners for $182K per unit. The sset is locted in the Shelbyville Rod Corridor. Clss A Brodwy Lofts, Ltd. sold The Lofts of Brodwy, (83 units) locted in the CBD to 3 Cpitl Group. The sle price ws $82K per unit. Clss B Lfyette Communities sold River Hills Aprtments (273 units) to Covennt Cpitl Group for $68K per unit. This property is locted in the Frnkfort Avenue/Brownsboro Rod Corridor. 12.% 1.% 8.% 6.% 4.% 2.%.% -2.% -4.% -6.% Louisville Averge Chnge in Sles (YOY) Nt ionl Averge Source: Rel Cpitl Anlytics, Commercil Kentucky Cushmn & Wkefield Reserch

5 Third Qurter SUBMARKET OVERVIEW RENTS & VACANCY BY SUBMARKET Avg Rents Vcncy Rte Dixie Hwy $725 Dixie Hwy 2% CBD $1,2 CBD 12% Frnkfort Ave/Brownsboro Rd $1,6 Frnkfort Ave/Brownsboro Rd 8% Est Brownsboro/Westport Rd $1,25 Est Brownsboro/Westport Rd 6% Shelbyville Rd $1,25 Shelbyville Rd 7% Mid-Brdstown Rd/Tylorsville Rd $89 Mid-Brdstown Rd/Tylorsville Rd 7% So. Brdstown Rd $9 So. Brdstown Rd 5% So. Preston Hwy $85 So. Preston Hwy 2% New Cut Rd $76 New Cut Rd 4% Source: Integr Relty Reserch UNDER CONSTRUCTION BY SUBMARKET Source: Cushmn & Wkefield Commercil Kentucky Reserch Note: Submrkets re defined by Integr Relty Reserch

6 Third Qurter SELECT CBD SUBMARKET NEWS Jefferson Development Group s new hotel, prtment nd retil complex plnned ner the corner of Lexington Rod nd Grinsted Drive hs now been nmed - One Prk. Plns cll for n prtment building with 581 units, hotel with 299 rooms, severl floors of office spce nd more thn 4, squre feet of resturnt nd retil. Bristol Development is ctively lesing their 269-unit Min & Cly Aprtments. The Edge on 4th is delivering Phse I nd Phse II, with move-ins beginning December 1, 218. Investor, i3 Cpitl Group, cquired The Lofts of Brodwy, converted 1896 wrehouse tht houses 83 loft-style prtments, in August for $6.8 million. Omni Hotels & Resorts is ctively lesing the 225 prtment units with the highest elevtions nd rents in the stte of Kentucky. Cityscpe hs stbilized the 3 unit Axis on Lexington. Prolific Louisville developer, LDG Development, is seeking rezoning for lrge two cre industril property t E. Gry Street nd supplementl property t 716 E. Chestnut nd 616 S. Shelby Streets, in connection with proposed multi-story prtment complex. The proposl includes the construction of 246-unit mix of townhomes nd flts. Poe Compnies is scheduled to deliver the 17-unit RiverPrk Plce, locted on the bnk of the Ohio River, during the second qurter of 219. Nshville investment firm, Covennt Cpitl Group, continued their Louisville spending spree with the purchse of River Hill Aprtments. The 273-unit complex off Mellwood Avenue sold for $18.5 million.

7 About Cushmn & Wkefield Cushmn & Wkefield is leding globl rel estte services firm tht helps clients trnsform the wy people work, shop, nd live. Our 45, employees in more thn 7 countries help occupiers nd investors optimize the vlue of their rel estte by combining our globl perspective nd deep locl knowledge with n impressive pltform of rel estte solutions. Cushmn & Wkefield is mong the lrgest commercil rel estte services firms with revenue of $6 billion cross core services of gency lesing, sset services, cpitl mrkets, fcility services (C&W Services), globl occupier services, investment & sset mngement (DTZ Investors), project & development services, tennt representtion, nd vlution & dvisory. 217 mrks the 1-yer nniversry of the Cushmn & Wkefield brnd. 1 yers of tking our clients ides nd putting them into ction. To lern more, visit or on Twitter. Crig Collins Senior Director Cushmn & Wkefield Commercil Kentucky 333 Est Min Street, Suite 51 Louisville, KY 422 Tel: ccollins@commercilkentucky.com Mike Kemether Vice Chir, Multifmily Advisory Group Cushmn & Wkevield 118 Pechtree Street, Suite 31 Atlnt, GA 339 Tel: mike.kemether@cushwke.com Copyright 217 Cushmn & Wkefield. All rights reserved. The informtion contined within this report is gthered from multiple sources considered to be relible. The informtion my contin errors or omissions nd is presented without ny wrrnty or representtions s to its ccurcy. commercilkentucky.com