Nashville Commercial Real Estate Market Continues to Grow
The “It City” has been growing steadily since 2011, and although growth has slowed slightly, it doesn’t seem to be stopping.
Last year, we were able to report that Nashville’s extreme growth had continued from 2016, and this year, we’re able to do much of the same.
Nashville’s growth—in both population and commercial real estate—has continued. And even though it’s shown signs of slowing slightly, we don’t predict it will stop any time soon.
Job Market & Population Growth Update
Perhaps one of the reasons Nashville has been able to sustain such significant population growth over the past seven years is because its job market continues to boom as well.
The job market experienced 2.1% growth from June 2017 to June 2018. And while that is less than the 4% growth experienced between May 2016 and May 2017, it’s still above the National average of 1.7% employment growth.
As a matter of fact, Nashville’s job market actually has a significant amount of openings, especially in the technology, healthcare and hospitality industries.
There are two sides to this fact. The first being that, if the shortage of workers is not remedied, it could spell trouble. The second, which Nashville Area Chamber of Commerce President Ralph Schulz mentions in the article, is this:
“‘To some degree, lower job growth is not a bad thing,’ Schulz said. ‘Nashville doesn’t want to be known as a community with an excess of workforce.’”
While this is certainly a challenge that must be addressed, it seems to indicate that Nashville’s job market is able to support its rapid population growth.
But that might come as no surprise if you consider that, in 2017, Nashville boasted the third fastest job growth among large cities, making it the city’s “sixth consecutive year within the top ten.” (Colliers Nashville Office Market Report – Q1 2018)
Beyond that, Nashville’s unemployment rate is the “among the lowest in the country” at just 2.8%. And the city was ranked #7 on Forbes’ list of America’s Fastest-Growing Cities in 2018.
Finally, in a report by POLICOM, Nashville was ranked as having “the 4th strongest economy in America,” moving up 6 spots from its 2016 and 2017 rankings.
Population is still growing, but has dipped below the famed “100 people per day,” and sits now at 94 per day.
According to the Tennessean, “This milestone is another sign that Nashville’s expansion may be cooling. Residential real estate prices have moderated, a record-setting run of monthly tourism growth came to an end in 2016, and the city is tightening its belt.”
Nashville Commercial Real Estate Update
While the city’s fever-paced growth might be slowing, commercial real estate developers seem to have more hope than ever in Nashville’s continued expansion.
Square footage of space under construction continues to increase, as does rent. Keep reading for more details.
According to JLL, total square footage of space under construction rose from 1,526,088 sq. ft. in Q3 2017 to 2,515,815 sq. ft. in Q2 2018.
What’s possibly more noteworthy is the fact that there is still “nearly 4 million square feet” of planned development in Nashville’s urban market.
Construction in Nashville is looking promising, as JLL reported on what it called “an interesting trend.”
“Nashville has traditionally never been a speculative office market, with most projects averaging approximately 30 percent pre-leasing before breaking ground. Now we’re seeing local and out-of-town developers put shovels to dirt without any tenants in hand.”
This seems to indicate that developers continue to have faith in Nashville’s growing market, despite potential indications of slower growth moving forward.
According to JLL statistics, vacancy rose from 8.2% in Q3 of 2017 to 10.6% in Q2 of 2018.
However, Collier reports a different statistic, putting 2018’s Q2 vacancy at just 7.8%, which it calls “a decrease of 70 basis points over last quarter…”
Regardless of which vacancy statistic you choose to believe, occupancy still looks promising.
Investment management and research firm AllianceBernstein is relocating its corporate headquarters “to downtown Nashville, bringing nearly 1,000 jobs and occupying an estimated 200,000 square feet of office space.”
And they’re not the only big-name company taking up residence. You can add Philips, who signed a lease at 414 Union Street, and Caterpillar, who acquired a “312,000-square-foot hub in Midtown,” to that list too.
According to JLL, rent rose from $25.77 per square foot in Q3 of 2017 to $27.47 in Q2 of 2018.
Beyond that, the average rent for Class A downtown properties (existing and under construction) reached its highest average rate ever at $33.38. Also important to note is that “asking rates for properties that are still at the proposed stage are upwards of $40 per square foot.” (Colliers Nashville Office Market Report – Q1 2018)
Nashville Growth Continues
While some statistics seem to indicate slowed growth of Nashville, there’s no denying that a population increase of 94 people per day and 4 million square feet of planned urban development still indicate substantial growth.
Nashville’s market may not be as red-hot as it was in 2016 or 2017, but it still continues to move forward at a fast clip.