As Kentucky’s second most populous city and the government hub of Fayette County, Lexington has a strong track record of rental demand growth, underpinned by attractive housing affordability, and a constrained regional housing supply. Supported by a resilient economy driven by major corporations in key sectors, Lexington presents an attractive landscape for multi-family real estate investment.
Steady economic growth
Lexington’s population of approximately 322,0001 people is supported by one of the nation’s most stable economies, anchored by key industries and a strong corporate presence including manufacturing (Xerox, Lexmark, Trane, Toyota, Jif), technology (IBM), logistics (UPS, Amazon), education (University of Kentucky), healthcare, and aerospace & defence (Lockheed Martin).2
Recent economic growth has solidified Lexington as an attractive market for investment. With annualized rent growth of 5.26% from 2018-2023 and a 93.4% occupancy rate over the past five years, the city's relative affordability and constrained housing supply further enhance its appeal as a favourable investment market.2
Rental market and supply
Lexington's real estate market continues to perform well, driven by a diverse employment base and strong economic growth, boosting rental demand and property values. Housing supply remains constrained due to the city's protected greenbelt, while multi-family construction starts are at a six-year low.2 Limited development activity and a balanced vacancy rate driven by sustained rental demand position Lexington to continue achieving steady rent growth, reinforcing its status as one of the region’s strongest markets. These factors create highly attractive conditions for multi-family real estate investors, with significant potential for continued growth.
Avenue Living recently made our first acquisition in the market, the Preserve Lexington property, which has 314 suites catering to the workforce housing demographic. Located in the Red Mile neighbourhood, this area is renowned for its proximity to the historic Red Mile Racing and the University of Kentucky, situated just two miles southwest of downtown Lexington.
Education and opportunity
Lexington is home to the University of Kentucky, the largest university in the state, known for its heavy focus on STEM programs and research. The city is also ranked as the 24th most educated in the U.S., with 43.6% of its population holding a bachelor’s degree or higher. A highly educated workforce attracts businesses and investors seeking an employment base conducive to innovation and creativity. Populations with higher educational achievement are also linked to better health outcomes, lower crime rates, economic resilience, and higher overall quality of life for individuals and the community.
Lexington also benefits from a thriving healthcare sector, a growing technology industry, and a strong presence in defence and manufacturing. The city's welcoming environment further enhances its attractiveness for individuals seeking educational opportunities, career advancement, and entrepreneurial opportunities.
Affordability and quality of living
Money magazine recently ranked Lexington, KY, in their list of “The 50 Best Places to Live in the U.S.” in 2024, citing the coveted cultural trifecta of “horse racing, bourbon tasting, and adventure chasing,” that and its unmistakable southern charm make it an attractive home for residents. Lexington, while more expensive than other locations within the state, also comes out ahead with its relatively low cost of housing, diverse population, and low unemployment rate.
Heritage, culture, and recreation
Known as the “horse capital of the world,” horse breeding, racing, and ranching make up a billion-dollar industry and are a major draw for regional tourism. The city is firmly committed to protecting the heritage and unique character of the area while ensuring the region remains attractive for growth and future development. The city’s infrastructure and plans also place great importance on green initiatives, sustainable development, and maintaining a high quality of life for its residents.
With its unique blend of heritage and economic growth, Lexington presents a compelling investment opportunity. The city's commitment to preserving its greenspaces and horsing culture, alongside its stable industries and reputable educational institutions, supports long-term resilience and growth. Avenue Living's investment in Lexington is guided by our deep market insights and confidence in the city's potential. As the region evolves, we are well-positioned to contribute to and benefit from Lexington’s ongoing prosperity.
This commentary and the information contained herein are for educational and informational purposes only and do not constitute an offer to sell, or a solicitation of an offer to buy, any securities or related financial instruments. This article may contain forward-looking statements. Readers should refer to information contained on our website at https://www.avenuelivingam.com/forward-looking-statements for additional information regarding forward-looking statements and certain risks associated with them.
Sources:
- U.S. Census Bureau. Lexington-Fayette Urban County, Kentucky: https://data.census.gov/profile/Lexington-Fayette_urban_county,_Kentucky?g=160XX00US2146027
- CoStar, 2024
- Commerce Lexington Economic Development: https://locateinlexington.com/data-facts-and-figures/why-lexington/
