Economic Overview
During the third quarter of 2026, the U.S. economy showed notable resilience and remained on a positive trajectory despite ongoing international conflicts, including tensions affecting global energy markets and key trade routes. These geopolitical challenges created uncertainty abroad, yet U.S. businesses and consumers continued to support economic expansion. Economic growth remained solid, with forecasters expecting real U.S. GDP to expand at roughly a 2.1% annualized rate, reflecting healthy consumer demand, business investment, and a stable labor market. Inflation remains a concern with core PCE up 0.2% in August and 3.0% year over year, above the Federal Reserve’s long-run 2.0% target. In response, the Fed unanimously voted to increase its benchmark interest rate by 25 basis points (bps) in September, the first rate increase in three years.
The Louisville area local labor market remains strong, with the seasonally adjusted unemployment rate in the Louisville-Jefferson County, KY-IN Metropolitan Statistical Area standing at 4.8% in July 2026. Economic development activity remained encouraging across the region, with critical capital investments in health care facilities, commercial construction, and infrastructure projects driving employment and strengthening Louisville’s long-term growth prospects.
Two of the most noteworthy investments came from two of Louisville’s largest employers. Ford Motor Company will invest $1 billion in a new paint shop at their current truck plant and GE Appliances will likewise invest $1 billion into production expansions at Louisville’s Appliance Park. Construction, business expansion, and technology-related projects contributed to capital spending throughout the metropolitan area. Overall, the third quarter highlighted a stable job market, ongoing development momentum, and sustained investment that positioned the Louisville economy for continued growth.
Cbd
Downtown leasing activity totaled 35,494 square feet (sf), with 23,650 sf in Class A buildings and 11,844 sf in Class B buildings. While 2025’s third quarter boasted an extraordinary 263,827 sf of new leasing activity, the current quarter, while lower, reflects continued positive leasing momentum in the submarket. 500 West Jefferson booked another notable deal this quarter with the law firm O’Bryan, Brown & Toner leasing 18,930 sf on the 20th floor. Absorption continued its positive trajectory, totaling 33,039 sf — a marked improvement over the negative 2,929 sf posted in the prior-year period. Air Equipment Company’s 20,400-sf occupancy at 750 East Jefferson Street accounted for the majority of the submarket’s absorption.
The CBD’s vacancy continued to decline during the third quarter with Class A lowering 80 bps from 25.9% last quarter to 25.1% and Class B dipping 90 bps from 17.6% to 16.7%. The overall CBD vacancy decreased 90 bps from 20.8% to 19.9% with the most notable contributions including Air Equipment Company’s previously mentioned absorption as well as the removal of 315 West Muhammad Ali Boulevard from the inventory in preparation for conversion to residential use. Overall CBD asking rates increased modestly, with Class A advancing from $20.30 per square foot (psf) to $20.84 psf, while overall asking rents rose from $17.79 psf to $17.97 psf.
Suburban
Suburban leasing activity accelerated sharply in the third quarter, recording 92,761 sf — outpacing each of the prior three quarters and nearly doubling the 51,468 sf posted in Q3 2025. Insuramax’s 13,329-sf lease at 13551 Triton Park Boulevard was the largest individual new lease recorded in the quarter. Suburban absorption closely tracked CBD levels, posting 38,316 sf. Absorption continued to outperform 2025, with the prior-year quarter reporting negative 17,366 sf. Wurth Industry’s 14,511-sf occupation at 9410 Bunsen Parkway contributed the most momentum to the quarter’s absorption.
Suburban vacancy rates experienced an overall compression of 80 bps throughout the quarter, decreasing from 16.0% to 15.2% with Class A dropping from 19.2% to 18.0% and Class B dipping from 13.9% to 13.5%. Overall asking rates edged higher to $20.06 psf from $19.95 psf the prior quarter, with Class A rates also advancing from $21.06 psf to $21.19 psf.
Investment activity in Lousiville’s suburban office properties continues to gain traction. Recent sales of 1601 UPS Drive to Steel Technologies and Wright Tower to Texas Roadhouse suggest predominantly vacant office properties are catching the eyes of user investors and occupiers as well-positioned investment opportunites. Those sales combined with well-located assets that are offered as cost-effective owner-user opportunites demonstrates the suburban office market is respositioning iteself to be a meaningful investment prospect.
