LOUISVILLE, Ky. (WDRB) – New office tenants in Louisville’s urban core are the focus of a $3 million downtown revitalization fund proposed by Mayor Craig Greenberg’s administration.
The fund would offer financial incentives to companies that don’t have a presence in the central business district and want to lease at least 50,000 square feet there. The cash incentives would be capped at $30 per square feet.
Current downtown tenants that want to expand in the business district wouldn’t qualify – a restriction meant to prevent “tenant hopping,” said Jeff O’Brien, executive director of the city’s economic development cabinet.
Money could be used on things such as construction materials, utilities and building infrastructure. Job creation and other factors will help determine how much a company will receive per square foot, said Caitlin Bowling, a cabinet spokeswoman.
In addition, the proposal would offer steep discounts on parking rates in city garages starting at up to 80% of current rates for new downtown tenants that sign a 60-month lease or longer for 20,000 square feet or more. Officials are eyeing about 700 of the city's roughly 2,000 to 2,500 "transient" spots that aren't reserved.
“Louisville and Kentucky have a limited set of economic development tools to begin with, and downtown's even further constrained by some of the other investments that we've made,” O’Brien said in an interview. He said the proposal is “just trying to put downtown on a level playing field with the other office parks."
If the $3 million for new office tenants isn’t committed within two years, any leftover monies would go to a housing assistance loan fund operated by the Louisville Downtown Partnership.
Jeff O'Brien, executive director of Metro government's economic development cabinet, October 3, 2023 (WDRB photo).
Vacancy rates in the business district – an area bounded by York Street to the south, Ohio River to the north, I-65 to the east and 12th Street to the west – have steadily climbed following radical changes to American work culture brought on by the COVID-19 pandemic, most notably shifts in working remotely from home.
As of June 30, 24% of all top-tier “Class A” office space sat empty downtown, according to data from real estate broker JLL. By comparison, that was more than twice as high as the 11.6% rate in suburban areas. The overall Class A vacancy rate was 16.6% in Jefferson County.
“I’m very positive on it,” Doug Owen, JLL’s senior vice president, said of the incentive proposal. He said it includes many things he wanted to see included.
Owen singled out the parking discounts as a key part of the plan, as well as having incentives covering construction costs.
“We have gone through a situation where the onus has been on the landlord to come up with these incentives – and they have done their part,” he said. “So we’ve been asking for the city to get in and share the responsibility for revitalizing downtown.”
Greenberg recommended $8 million for the fund in his budget submission, but the Metro Council reduced the request to $3 million in the spending plan it ultimately approved.
O’Brien and Deputy Mayor for Economic Development Pat Mulloy briefed the council’s labor and economic development committee about the plan Tuesday afternoon. Mulloy called the changing vacancy rates downtown a “near term disruption” that also creates a “tremendous opportunity.”
Mulloy told council members that the incentives could help companies like a “large out-of-the-city institution” that is interested in having offices downtown.
Council member Anthony Piagentini (R-19th District), the committee's vice chair, raised a concern about potentially incentivizing businesses to move from one part of Louisville to another.
"What I want to avoid is it's a zero sum game and we're just moving businesses around the city," he said. "And now we're competing for regions against downtown. I don't want to create that."
Greenberg recommended $8 million for the fund in his budget proposal, but the Metro Council reduced the request to $3 million in the spending plan it ultimately approved.
One idea floated by the mayor's administration that needs more discussion is a plan to rebate occupational license fees for office tenants that create new jobs in the business district or Metro Louisville overall. The Metro Council ultimately would have to approve that through an ordinance.
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