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The Nashville metropolitan retail market remains strong in comparison to the rest of the United States as the overall vacancy rate dropped to 5.7 percent at the end of the third quarter. Nashville’s MSA has grown to more than 1.6 million residents and ranks as the 38th largest MSA in the country with Nashville being the largest core population in the state of Tennessee.
The strong economy is supported by diverse sectors of industry including healthcare, entertainment, education, and automotive. At the end of the third quarter, the unemployment rate dropped to only 7.3 percent compared to the national average of 8.6 percent.
Highly sought after retail submarkets, such as Green Hills, Brentwood, and Midtown/West End Avenue corridor, have little to no vacancy which has spurred a new trend in Nashville: urban and mixed-use redevelopments. The lack of available large tracts of land for development in and around metro Nashville has created significant demand back into the core urban markets of Nashville.
For example, following the success of the highly touted Hill Center retail/office project a few years ago, the Green Hills Mall underwent a major expansion to accommodate Tennessee’s first Nordstrom and Container Store in 2011.
In Brentwood, Bristol Development is finishing construction on its new upscale 400-unit apartment complex, Tapestry, adjacent to Brentwood Place Shopping Center, which added Golfsmith in the former Borders space in 2012. Also in Brentwood, a joint venture between H.G. Hill Realty and GBT Development is planning a major mixed-use development at the former Murray Ohio headquarters site.
In early 2012, Walmart opened its first urban prototype in Tennessee at only 95,000 square feet (half of their typical 185,000-square-foot superstore) near the 100 Oaks Mall. The former EXPO Design site provides Walmart access to residents in several dense urban neighborhoods like Berry Hill, Green Hills, and 12th South; and it is easily accessible to downtown dwellers. Additionally, Office Depot opened its smaller urban 5,500-square-foot layout in Green Hills in a former Blockbuster space in the third quarter.
Downtown Nashville continues to draw retail demand, especially in and around the hot nightlife areas of the Gulch. Tenants such as Bar Louie, Margaritaville, and Urban Outfitters recently opened their first locations in Nashville. With the grand opening of the new 1.2 million-square-foot Music City Convention Center planned for early 2013, downtown Nashville should see significant growth and redevelopment south of Broadway. Spurring that growth is the new $250 million, 800-room Omni Hotel, which is scheduled to open in 2013.
Many suburban markets surrounding Nashville are experiencing new growth as well with large tenants such as Academy Sports announcing locations in Mt. Juliet and Smyrna; and Sam’s Club is relocating to a new superstore in Hendersonville.
Another major retail story in Nashville this year was the re-opening of one of Tennessee’s largest malls, Opry Mills. The 1.2 million-square-foot project suffered damage in the floods of May 2010 and sat empty for almost 2 years. Opry Mills underwent $200 million worth of renovations by owner Simon Property Group and has re-opened to strong retail sales with retailers such as Bass Pro Shop, Sun & Ski Sports, and Dave & Busters.
In the capital markets sector, Nashville has attracted demand from national institutional and international investors as the economy weathered the storm of the recession better than other cities. This is evidenced by Munich, Germany-based GLL Partners’ $73 million purchase of Nashville West Shopping Center in June 2012. The 700,000-square-foot center is anchored by Target, Best Buy, Dicks, and Books-A-Million.
In one of the largest commercial transactions in Nashville in years, LaSalle Investment Management purchased 100 Oaks Mall in October. The once troubled mall underwent a major renovation in 2009 when Vanderbilt University Medical leased over half of the 850,000-square-foot mall for outpatient clinics and services. The project is now 99 percent leased and includes retailers such as TJ Maxx, Ross Dress For Less, Michaels, Petco and Panera.
Nashville is poised to experience further growth as the city has become a strong locale for corporate relocations. Amazon has announced two new facilities, and General Motors is planning to re-open its Spring Hill Plant. Increasing job growth coupled with strong absorption and low vacancy rates should lead to more positive activity for the retail sector.
— Charles Warner, vice president, Baker Storey McDonald Properties