Louisville Commercial Real Estate 3rd Quarter Review of Sales

With the 3rd Quarter of 2011 behind us, I decided to do some market analysis of the Commercial Real Estate market here in Louisville.  Here is what I found.

The Numbers

According to KCREA (Kentucky Commercial Real Estate Association), 161 total sales were reported from January 1, 2011 through September 30, 2011.   These sales had a dollar amount of approximately $75,923,496.   Average transaction size was about $471,575. This translates into approximately 4.1 sales transactions per week. (note about numbers:  Obviously duplicate transactions, transactions with incomplete data and transactions with obvious errors were omitted when calculating these figures.) 

Sales Data breaks down as follows:  (note: figures are 2011 YTD figures through 3rd Qtr)

• Industrial Sales  31 transactions totaling $34,488,500;  Avg building size 48,749 SF; Avg Sale Amount $1,112,532; Avg Sales Price / SF $22.82 / SF; Avg asking price $22.18 / SF
• Multifamily Sales - 22 transactions totaling $5,723,600; Avg building size 14,004 SF; Avg Sale Amount $260,164; Avg Sales Price / SF $18.58; Avg asking price $40.66 / SF
• Office Sales - 33 transactions totaling $13,482,000; Avg building size 8,937 SF; Avg Sale Amount $408,545; Avg Sales Price / SF $45.71; Avg asking price $78.34 / SF
• Retail / Shopping Ctr Sales - 42 transactions totaling $12,162,750; Avg building size 5,370 SF; Avg Sale Amount $289,589; Avg Sales Price / SF $53.93; Avg askign price $70.40 / SF
• Special Purpose Sales - 11 transactions totaling $2,245,100; Avg Sale Amount $204,100
• Vacant Land Sales - 22 transactions totaling $7,821,546; Avg tract size 34.96 acres; Avg Sale Amount $355,525; Avg price paid per acre $10,169 / acre; Avg asking price $42,689 / acre.

What this means

The striking thing to note is the prices.  Without a frame of reference, this may not mean much but the prices are down in almost every category.   Comparing the sales prices to the asking prices gives a better picture of the market at large.   Industrial prices while low seem to have stabilized with asking prices essentially equal to the sales prices being paid on average.     Sales prices on Office and Retail however are off considerably from asking prices.   More than likely this indicates that most of the properties being sold are distressed properties.   Land is a slightly more complicated beast but with an average sales price of around $10,000 per acre, this indicates that there is still very little development going on.   Land which sells in this price range typically is more rural or agricultural and more than likely does not have commercial zoning, utilities to site or other infrastructure necessary for development.

The other part to consider here is the amount of unsold inventory.   Presently on KCREA there are nearly 11,000 listings.  (this includes both lease and sale listings).   This inventory has increased tremendously over the last couple of years.   With only 161 sales this year, you can see that it would take years to eliminate all of the existing inventory.    The best advice continues to be that if you are selling property, you HAVE to do everything possible to have it in the top 5% of listed properties, in condition and in price. 

Let me know if you have any questions about this article or about commercial real estate. 

Have a great day!

David

David W. McCoy
Associate Broker
Commonwealth Commercial Real Estate
10444 Bluegrass Pkwy
Louisville, KY  40299