Horses, bourbon, tobacco. No, we're not talking about The Godfather; we're talking Lexington and Louisville, Kentucky's two most diverse cities. Separated by a mere 70 miles, Louisville and Lexington are known by such names as the “northern most southern city” and the “Athens of the West,” respectively. Both have deep business and cultural histories. And Louisville will draw international attention on two sporting fronts in 2008: the Kentucky Derby in May and the Ryder Cup golf tournament in September.
The city is well-suited to handle the challenges of hosting these two premier sporting events, even as it navigates the ever-changing multifamily landscape. Both Louisville and Lexington have weathered the changing housing and job markets with ease. And thanks to solid metrics, rent growth, and a handful of new development opportunities, these two cities should continue to show growth prospects for investors in the foreseeable future.
A DIVERSE DRAWNo one denies that the Louisville and Lexington robust economies are luring major developments in a variety of industries. Ideally located, the cities have mild winters and beautiful warm seasons. They are home to top universities such as the University of Kentucky in Lexington and the University of Louisville, as well as places of rich tradition, from horse farming and racing to bourbon production. iStockPhoto
Few markets can boast a leading edge in the educational, medical, transportation, manufacturing, and technology industries coupled with traditional liquor, tobacco, and equine businesses. In the past few years, these qualities and many others continue to drive economic and population growth and attract multifamily investors.
The city of Louisville, for instance, recently focused on growing its downtown by adding new condos and apartments; a new $250 million multi-purpose arena; and the $465 million Museum Plaza, which will be the city's tallest building when it opens in 2010. Museum Plaza will include a contemporary arts center, condos, a hotel, and office space. Meanwhile, health care giant Humana recently announced a 1,100-job expansion and is also growing its downtown headquarters.
And in Lexington, ground broke in early 2007 for the new $450 million UK Chandler Hospital. At more than 1 million square feet, this hospital, which will be completed in 2011, will be the cornerstone of a 20-year, $2.5 billion plan to construct the Commonwealth Medical Campus of the Future.
WORKING HARD Despite this influx of development activity in a variety of industries, Lexington and Louisville face a common challenge: how to replace a continuous loss of manufacturing jobs. Of course, the new jobs that replace them need to boast similar high-paying, long-term positions that can keep each city growing.
As both municipalities continue to battle the loss of manufacturing jobs, both have much at stake to keep their remaining high-profile factories open, especially in the auto sector where Toyota and Ford occupy major plants and are near the top of each city's employers list. Louisville and Lexington have an advantage, however, in that their respective locations and diverse economies, as well as being home to major educational and medical complexes, have kept them on track for current and future growth.
The current housing market downturn has slowed the economies recently, though to a lesser degree than in other locales throughout the United States. However, the effect is similar—residents more concerned with the overall economy are more inclined to cut back on spending.
On the auto front, high gasoline prices and the negative repercussions of the housing downturn have resulted in softer demand for autos. Fortunately, the Toyota plant in Georgetown, Ky., just north of Lexington, is home to the top-selling Toyota Camry, and Louisville's Ford Plants are home to the popular Ford Explorer and F-series trucks. What's more, union workers agreed to a four-year contract late last year giving them added security. Ford also is bringing two of its new flexible body shops to Louisville, which enables each plant to produce more than one type of vehicle.