Decent Economies Translate to Solid Apartment Market Performances in Kentucky
Local economic shifts usually tell us quite a bit about what is happening in individual apartment markets, and that’s true for Kentucky’s two largest metros – Louisville and Lexington.
While Louisville and Lexington both lost jobs in 2008-2009, their backtracking was fairly mild compared to the cuts seen in the nation as a whole. In turn, their apartment sector performances only lost a little bit of ground. More recently, the return of job growth has taken total employment to just a hair under pre-recession levels. And apartment revenues, likewise, have moved back on track.
Louisville’s job count currently stands at roughly 613,000 positions, still about 20,000 jobs off the pre-recession peak but up some 40,000 jobs from early 2010’s low. The Bureau of Labor Statistics reports the area’s annual growth pace as of April at 2.4 percent, with nearly 15,000 jobs added during the past year.
For Lexington, today’s job tally is 251,000 positions. There are about 10,000 jobs to go before employment is back to its pre-recession high, but additions seen since the performance bottomed have reached some 12,000 jobs. As of April, the annual job growth pace was running at roughly 1 percent, after having been at 1.6 percent during 1st quarter.
Louisville’s 1st quarter average occupancy rate of 94.9 percent in the apartment sector exactly matched the national norm. Local occupancy climbed 0.9 percentage points during the past year. Effective rents for new leases jumped 4.2 percent from early 2011 to early 2012.
In Lexington, 1st quarter apartment occupancy came in at 94.5 percent, up 1.3 percentage points on an annual basis. Annual rent growth as of early 2012 was 3.3 percent.
Most individual properties in both metros actually post results that somewhat exceed the norms, since each area has a neighborhood that’s underperforming the metro average by a very big margin. In Louisville, that underperformer is the less desirable West Louisville area, where occupancy is just 92.3 percent and annual rent growth is at 2.8 percent. Lexington’s weak link is the East Lexington locale, where occupancy is 92.1 percent and rents basically didn’t budge during the past year.
Given the very close correlation between local job shifts and the apartment market performances seen of late in Louisville and Lexington, the near-term employment growth patterns are what to watch. And here’s something to really like about the economies in these metros: they aren’t suffering the government job cutbacks seen so commonly elsewhere. That means private-sector additions over the near term are likely to boost the total job count, rather than just fill in the hole created by public-sector downsizing.
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