Nashville Office and Industrial Space Remains in High Demand
Last year we reported on the red-hot growth of Nashville’s commercial real estate market. This year, the story remains much the same, with the market continuing to see very healthy growth.
One big factor that continues to fuel both office and industrial space occupancy and development is employment. Nashville’s job growth in recent years has been nothing short of phenomenal. Between 2010-2016, employment in the Nashville area has grown by 23 percent. And it’s expected to continue growing.
Here are a few other recent positive notes about Nashville’s job market:
- Forbes reports that “since 2011, Nashville’s job count in professional and business services has expanded a remarkable 42.6% to 160,300, easily the highest growth rate of any major metropolitan area.”
- NerdWallet ranked Nashville number 3 on its list of the 10 best cities for job seekers in 2017.
- Nashville Business Journal recently reported on a new study that finds our city leads the nation when it comes to growing its employment ranks.
Strong employment mixed with a business-friendly community continues to make Nashville a top destination for companies looking to move or expand their operations.
2017 Nashville Commercial Real Estate Update
In a report on the national commercial real estate outlook for 2017, The Business Journal specifically mentions Nashville, stating:
“The tech markets, New York, the Bay Area, Austin, and some others like Nashville have had very healthy office take up – office vacancies declining, strong rent growth. They’ve moved along on the curve to a much healthier place and are beginning to see more and more development.”
That pretty much sums the state of Nashville commercial real estate in 2017. New development, occupancy, and rental rates are all on the rise (even if growth has slowed slightly since last year). To sum up Nashville’s commercial market in a nutshell: things are looking good.
Here are some key stats on the current state of the Nashville commercial real estate market from Colliers International:
Occupancy: Nashville Office & Industrial Space Remains in High Demand
Nashville’s office vacancy rate in the second quarter of 2017 was 6.2 percent. That’s slightly higher than the last time we reported on the office market (Q4 2015) when the rate was 5.8 percent.
However, the uptick in vacancy may have more to do with the volume of new office space moving into the area as opposed to more companies moving out. The Colliers report notes: “Nashville delivered 1.8 million square feet [of new office space] in 2016, a record for Middle Tennessee, and 797,356 square feet delivered so far in 2017.”
Also notable is the big drop in industrial vacancy this year. The vacancy rate for Nashville’s industrial market in the second quarter of 2017 was 3.8 percent—down from 6.1 percent a year ago. The amount of new industrial space in Nashville is also increasing, with 1.57 million square feet hitting the market in Q2 (compared to just over 310,000 square feet delivered in Q2 2016).
Rent: Cost of Renting Commercial Space in Nashville Continues to Rise
With the high demand for commercial space, rental rates just keep going up. Colliers notes, “Asking rents up to $40 per square foot for new construction in the Downtown submarket have become the new norm, as rental rates in Nashville continue to shatter records.”
The average rental rate for office space in Nashville for the second quarter of 2017 was $25.82 per square foot—up $3.81 per square foot from the fourth quarter of 2015. Perhaps even more notable is the fact that average Class-A rental rates in high-demand areas like West End, Green Hills and Cool Springs are actually exceeding average rental rates for office space in Downtown.
The rent on industrial space increased even more than it did for office space. The average industrial rent increased $5.26 per square foot—a 7.3 percent increase over the first quarter of 2017. You can safely expect rental rates to keep rising as demand remains high.
Construction: New Developments Popping Up Throughout the Nashville Area
As anyone who’s driven around the area lately knows, there’s a lot of commercial development taking place in Nashville. By the end of 2017, we’ll have 2.2 million additional square feet of new office space—with 1.4 million of that in Downtown. In addition, there’s currently 4.5 million square feet of industrial space under construction—with 3.5 million set to be completed by the end of the year.
Some notable new developments under construction right now include:
- The 30-story Bridgestone Tower is nearly complete in SoBro and will open by the end of the year. The Tower will house more than 1,700 Bridgestone Americas employees.
- By the end of 2017, Gresham Smith & Partners will deliver a Class-A, 25-story office tower with 362,000-square-feet of space at 22 Second Avenue.
- Lowe’s is set to open a 1 million-square-foot fulfillment facility in Coopertown in 2018. The massive facility will be the equivalent of 22 football fields under one roof.
And a few other major commercial constructions on the horizon:
- The mixed-use development in the works for Fifth + Broadway (the old Nashville Convention Center site) is expected to include 375,000 square feet of commercial Class-A office space ready for occupancy by 2019 or 2020.
- Panattoni Development has plans to develop a five-story, 120,000-square-foot office building on Music Row. Music publisher BMG has agreed to serve as the anchor tenant.
- LG is constructing an 829,000-square-foot home appliance manufacturing facility near Clarksville set to open in 2019.
It’s an exciting time to be in Nashville and watch our business community grow and flourish. We’re proud to be a part of it and to deliver our high quality carpet, floor and upholstery cleaning services to the many great buildings, facilities and businesses in the area!
Image credit: Viv Lynch