The Louisville industrial market demonstrated continued resilience through the third quarter of 2025, supported by solid economic fundamentals and steady tenant activity despite modest absorption and rising vacancy.

Economic Overview

The national economy remained on firm footing through Q3, bolstered by strong GDP growth and an improving inflation outlook. The Federal Reserve lowered the federal funds rate by 25 basis points in September to 4.09%, with additional cuts anticipated by year’s end. GDP rose 3.8% in Q2, surpassing expectations and signaling that tariffs and inflationary pressures have had less impact than feared.

Locally, Louisville continues to ride a wave of steady growth powered by expansions in manufacturing, infrastructure investment, and downtown revitalization. The city’s unemployment rate held at 4.3% in Q2, with anticipated increases largely tied to a growing labor force rather than job losses. Nearly half of the 65 projects outlined in the Louisville Downtown Development Strategy are already underway, while infrastructure upgrades along I-65 and I-264, as well as downtown street conversions, are improving accessibility. The city’s thriving tourism sector also contributed to economic momentum—September’s Bourbon & Beyond and Louder Than Life festivals drew over 450,000 attendees, generating an estimated $43 million in local economic impact and pushing hotel occupancy above 80%.

Market Overview

Louisville’s industrial sector posted its third consecutive quarter of steady leasing, with 1.4 million square feet (msf) of new deals inked. Year-to-date (YTD) leasing activity reached 4.1 msf—trailing 2024’s 5.1 msf but indicating sustained demand. Southern Indiana led submarket activity with 706,633 square feet, highlighted by Ford’s 567,433-sf lease.

Net absorption was modest at 36,959 sf for the quarter, impacted by several large move-outs, including Hillsdale Furniture’s 432,806-sf departure from the South submarket. Year-to-date absorption totaled 1.3 msf, slightly below the 1.6 msf recorded during the same period in 2024. The overall vacancy rate rose slightly by 20 basis points to 3.9%, but leasing velocity remained consistent across most submarkets.

Bulk Overview

Bulk warehouse leasing remained healthy, totaling 1.0 msf—on par with Q2’s 1.1 msf. Ford’s Southern Indiana lease accounted for about half of quarterly activity, while the South submarket contributed additional large deals, including a 203,840-sf sublease and a 175,000-sf direct lease. However, the market recorded negative absorption of 165,819 sf, the first decline since early 2024. Bulk vacancy climbed from 5.1% to 6.4%, influenced by new speculative completions and large move-outs.

Construction Overview

Construction activity accelerated in Q3 with two notable completions: LDG’s 211,969-sf speculative facility and Pizzuti’s 236,234-sf build-to-suit project, adding 448,293 sf to the market. Year-to-date, 1.4 msf of new industrial space has been delivered—entirely within the Southern Indiana submarket.

Seven new projects totaling 2.3 msf broke ground during the quarter, led by Shelby County (1.0 msf) and Bullitt County (736,070 sf). The active construction pipeline now totals 8.3 msf, with an equal amount in planning. Southern Indiana continues to dominate active development with 3.6 msf underway, while Bullitt County leads future planning with 3.3 msf, positioning it as a potential leader in upcoming industrial activity.

Outlook

Despite a mild rise in vacancy and slower absorption, Louisville’s industrial market remains fundamentally strong. With significant projects under construction, expanding manufacturing investments, and robust tenant demand, the region is poised for continued growth into 2026.