Here's what to know
Matthew Glowicki Louisville Courier Journal
As downtown Louisville struggles with lower-than-typical office occupancy rates, city officials are offering a new incentive for businesses to relocate there.
The "downtown tenant improvement program" would attempt to woo office tenants by providing up to $30 per square foot toward physical improvements, including construction materials and permanent fixtures.
Funding comes from the Louisville Metro Council's allocation of $3 million in the fiscal year 2024 budget to a "downtown revitalization fund," down from $8 million as originally proposed by Mayor Craig Greenberg.
"Whenever you come into a new space, you've got to do tenant improvements," Deputy Mayor Pat Mulloy said Tuesday at a council committee meeting. "You've got to move the drywall. You've got to paint. You've got to put down new carpet."
The incentive is one step city government is taking to try and attract businesses downtown, where office building vacancy rates hover around 25%.
Jeff O'Brien, executive director of economic development, said he anticipates the vacancy rate to increase as leases expire and business tenants choose to downsize in an age of hybrid work environments.
Businesses new to the central business district — bounded by the Ohio River to York Street and from Interstate 65 to 12th Street — qualify for the tenant improvements incentive, as do existing businesses that are expanding within it.
Businesses simply relocating within the district won't qualify but those moving downtown from another part of Louisville would, according to the city's Cabinet of Economic Development.
Other qualifications include a lease term of at least five years for a minimum of 50,000 square feet (Mulloy said many downtown office building floors are about 15,000 square feet). A claw-back provision in the incentive terms allows the city to recoup some of the incentives if a business leaves before the end of its lease.
More people downtown, be they office workers or residents, makes for a stronger urban center, city officials told council persons.
"It's the emptiness of the city, and cities, they need people to be alive," Mulloy said. "We've got all kinds of storefronts all over this downtown where we need people buying sandwiches or buying a beer at 5 o'clock with their buddies."
Should there be any office-related incentive funding remaining after 24 months, the funds would shift to the Louisville Downtown Partnership's housing assistance loan fund, which gives developers incentives to build workforce housing (defined as 80% of area median income).
O'Brien also highlighted a new incentive from The Parking Authority of River City that gives a parking rate discount to new downtown tenants leasing 20,000 square feet of space or more. This incentive is separate from the $3 million fund.
He said on any given day, about 700 out of approximately 1,500 daily parking spaces downtown go unused.
For the first two years of the five-year PARC incentive, tenants would receive an 80% discount. The following years would drop to 65%, 45% and 20%.
Republican Councilman Anthony Piagentini, who represents District 19 in eastern Jefferson County, said he welcomes Louisville businesses to move as they please but hopes the incentive draws outside interest and doesn't simply persuade suburban Louisville businesses to relocate downtown.
“Hopefully we see a complete net gain across the city, not just shifting chairs in the same room," he said.
Mulloy also told council committee members that he anticipates coming back to the council to ask for more funds to incentivize the conversion of downtown office space to housing.
“It’s not a time to take stupid risks, but it’s a time to be intentional," he said. "Let’s take some risks. I promise you we will make some mistakes. We’ll screw up. We’ll put something in a deal that didn’t turn out the way we all thought it should. But I’d rather do that than sit on our hind quarters and not do anything.”
Growth & development reporter Matthew Glowicki can be reached at firstname.lastname@example.org, 502-582-4000 or on Twitter @mattglo.