Market Reports

Is Nashville’s Multifamily Market Overbuilt? Maybe, But Not for Long

by John Nelson March 12, 2018

Nashville has set several notable records in recent years for job growth, rent growth, population growth, tourism and tax revenue, among others. But for the multifamily industry, the most notable benchmarks lately have been related to the amount of inventory that has been delivered. However, the more interesting and less obvious data point is the record level of renter demand that Nashville is currently experiencing. As of third-quarter 2017, Nashville led the country in relative net absorption, with 4.9 percent of the existing inventory being absorbed. This equates to approximately 6,300 units. This demand is fueled by incredibly resilient job creation, as Nashville has increased its employed labor force by 20 percent over the last five years — more than 160,000 jobs. With that as the backdrop, the big question on everyone’s mind is the impact of new supply. In short, yes, there are pockets of oversupply, with approximately 8,500 units delivered in 2017 compared with net renter demand of roughly 6,300. However, with urban deliveries projected to drop off 40 percent in 2018, and 80 percent in 2019, and no slowdown in renter demand on the horizon, the current imbalance is likely to correct itself in relatively short order. …

March 12, 2018

Industrial Market Reports Southeast Southeast Market Reports Tennessee

Nashville’s Growing Industrial Pipeline Limits Available Sites, Labor

by John Nelson March 5, 2018

Everyone is familiar with the expression “Rome wasn’t built in a day.” However, what most people do not know is that the second half of that phrase is, “but they were laying bricks every hour.” Bricklayers in Nashville are busy people these days, accommodating the demand for new commercial development. That’s not just a metaphor for the developers of record — the utility contractors, dirt movers, pavers, framers and roofers are all busy trying to keep up with the constant stream of construction. With record levels of construction comes the high demand for a skilled workforce to complete the necessary work. We constantly hear that approximately 30,000 people are moving to Nashville per year. However, a large amount of this new workforce via this in-migration are millennials looking to work in the IT or healthcare fields rather than skilled labor. If you were to ask any “bricklayer” what concerns them the most, almost assuredly the recruitment and retention of qualified labor will be at the forefront of the conversation. With the younger generation less likely to enter the blue collar workforce, why in 2017 did we see 6 million square feet of industrial warehouse space delivered? Make no mistake, that …

March 5, 2018

Market Reports Office Southeast Southeast Market Reports Tennessee

Memphis Office Market Proves That ‘Slow and Steady Wins the Race’

by John Nelson May 22, 2017

Memphis may be known for its industrial market, but there are several interesting stories unfolding in the Memphis office market as well. Investors, both local and national, have found opportunities in an office market that can relate to the phrase, “slow and steady wins the race.” The Memphis office market consists of just over 52 million square feet, with nearly 60 percent of that in the Downtown, East and 385 Corridor submarkets and more than 85 percent of the Class A space located in those same submarkets. The Memphis metro ended 2016 with overall vacancy rates of 10.5 percent. Those rates have remained in the 10.5 to 10.9 percent range for the last two years. Class A vacancy has been on a slow and steady decline, falling from 10.2 percent at the end of 2014 to 7.9 percent at the end of 2016, its lowest level in more than a decade. This has prompted Class B owners to make investments in their properties, like the $7 million capital investment by Clark Tower, located in the East Memphis submarket, to upgrade mechanical systems and common areas. Rates, too, have been relatively steady for the last decade. At $17.07 per square foot …

May 22, 2017

Industrial Market Reports Southeast Southeast Market Reports Tennessee

Memphis Expects to Bolster Its Stellar Industrial Reputation with Strong 2017

by John Nelson May 15, 2017

In 2015, the Memphis industrial sector reached a record-breaking 8.4 million square feet net absorption. Achieving absorption in 2015 at a level that was higher than before the recession would have seemingly set 2016 up for a downturn. However, industrial growth, with Memphis at the epicenter of world distribution, allowed the positive trajectory to continue. The Memphis MSA absorbed approximately 6 million square feet in 2016. Given ideal geographical positioning, Memphis is known as America’s Distribution Center, boasting unparalleled expertise in distribution and logistics. The Memphis International Airport houses the second-busiest cargo airport in the world. Companies recognize that Memphis offers reliable, cost-effective distribution, with the ability to reach 70 percent of the U.S. population within 24 hours. Moreover, Memphis is one of only three cities with five Class I Rail Systems and has the fifth largest inland port, as well as 10 major trucking companies utilizing interstates I-40 and I-55. It’s no wonder that FedEx World Hub makes Memphis its home, and UPS chose it as a major hub. With those constants in place, the most notable recent change is the expansion of the submarkets, and how they compete for the warehouse and distribution business. In the past, when …

May 15, 2017

Market Reports Retail Southeast Southeast Market Reports Tennessee

Restaurants, Grocers, IKEA Headline Positive Retail Activity in Memphis

by John Nelson May 8, 2017

If it’s been several years since visiting Memphis, it’s time to come back and see the improvements. The city and suburbs have experienced large amounts of new construction and redevelopments, from the downtown Memphis Pyramid becoming the grandest Bass Pro Shops outside of their headquarters to the new Tanger Outlets in Southaven, Miss., and many more developments in between. The most active retail category continues to be restaurants, followed closely by grocers and service-oriented retailers. New restaurants have leased space across the market, varying from fast-casual options like Pimento’s Kitchen + Market to upscale options like Cheesecake Factory and Char, a steakhouse based in Jackson, Miss. In the grocery sector, Kroger, The Fresh Market and Whole Foods Market expanded their reach by adding new and redeveloped stores. Kroger, with its 125,000-square-foot Marketplace concept, is further solidifying market share and geographic footprint with Marketplace units in Hernando and Arlington and a 100,000-square-foot unit in Germantown. These locations were also joined by new-to-Memphis Sprouts Farmers Market. Trader Joe’s also announced plans to open a new store later this year. One of the most notable new Memphis-area retailers is IKEA, which opened its 271,000-square-foot store along Interstate 40 in late 2016. The store …

May 8, 2017

Industrial Market Reports Southeast Southeast Market Reports Tennessee

Nashville Industrial Market Will Continue to Ride its Hot Hand Through 2017

by John Nelson April 17, 2017

The Nashville commercial real estate market’s growth is no longer a local secret. In fact, it very well may be one of the most desired areas for investors for an MSA with a population less than 2.5 million people. In case you haven’t heard, read or taken notice, you likely have been living under a rock. Those who call this market “hot” are making an understatement. As the downtown core sees land sites trade in excess of $13 million per acre (and in a few interesting cases eclipse $1,000 per square foot), the multifamily and hospitality markets have moved at a torrid pace. Even office rents have climbed to record highs near $40 per square foot for full service gross rates. Some covering that sector project this number will peak around the $50 per square foot mark due, in part, to the higher land costs driven by the other sectors. Multifamily developers have seized upon this growth by paying record prices for downtown real estate in hopes of capturing the fancy of Millennials as they enter the workforce. Top this off with hotel stays in downtown costing as much as those found on Times Square in Manhattan, some ponder the …

April 17, 2017

Market Reports Office Southeast Southeast Market Reports Tennessee

Nashville’s Tight CBD Benefits the Metro’s Satellite Office Submarkets

by John Nelson April 10, 2017

Robust population and job growth are fueling a resurgence across all sectors of Nashville’s commercial real estate market, pushing vacancies lower, boosting rental rates and attracting strong interest from investors. With increasing demand for office space in the central business district (CBD), a rush of both in- and out-of-state developers and equity have descended on Nashville to deliver Class A product. That delivery timeline has subsequently pushed the demand for existing space to the adjacent Midtown, Wedgewood-Houston and MetroCenter submarkets. These satellite areas are benefiting from the positive absorption with existing space back-filled in record time, and some deliveries of conversions of older warehouses to hip office and retail space. CBD Construction Perhaps predictably, after the city climbed higher among the nation’s top job markets, (ranking third on NerdWallet’s list based on top cities’ unemployment rates and increase in working-age population between 2010- 2015), Nashville ranked sixth among the nation’s top cities for real estate investing in 2017, one spot higher than last year, in the annual Emerging Trends in Real Estate report put together by PricewaterhouseCooper and the Urban Land Institute. These accolades are a testament to Nashville’s crane-filled skyline, confirming that new construction is the dominant force in …

April 10, 2017

Market Reports Multifamily Southeast Southeast Market Reports Tennessee

Accelerating Demand, Deliveries Set the Tone for Nashville’s Apartment Market

by John Nelson April 3, 2017

The Nashville multifamily market’s roll continued through the end of 2016 with nearly 6,400 units absorbed, a 10 percent increase compared to 2015, according to Axiometrics. This demand was fueled by steady employment growth of nearly 28,000 new jobs, led by world-class healthcare employers, educational institutions and a burgeoning tech scene. The rate of job growth in Nashville is currently about 50 percent faster than the national level, and as a top destination for young people and the creative class, it’s becoming a cultural and entertainment destination that’s nationally recognized. Rental rates grew on average by 5.6 percent in 2016, buoyed by the fact Nashville had the nation’s second-highest rate of wage growth at 5.3 percent, behind only the Silicon Valley tech hub of San Jose, according to Headlight Data. Average market occupancy remained tight at an average rate of 96 percent, with the Murfreesboro, Southeast Nashville (Antioch) and Sumner County submarkets being the highest performers to end the year. Four submarkets saw rent growth over 7 percent in 2016, including Southeast Nashville, Wilson County/Hermitage, Airport/Briley Parkway and Rivergate/Hendersonville. Submarkets with concentrations of new supply lagged the market average, highlighted by Downtown and Williamson County. Transaction volume set a new …

April 3, 2017

Market Reports Retail Southeast Southeast Market Reports Tennessee

Nashville’s Retail Market is Growing Leaps and Bounds, Both Inside and Out

by John Nelson March 27, 2017

Just like the hit show, “Nashville,” Nashville’s retail market has more than one storyline in play and all of them intertwine to create a tapestry that showcases the retail development in our city. You don’t have to look too hard around downtown Nashville to see the redevelopment surge that is bringing retail as part of mixed-use and traditional developments to this market. Greenfield development in suburban nodes is also capturing the spotlight, albeit a smaller one, as a direct result of the intown growth that is driving up land and construction costs to a level that puts available space out of reach for many retailers. Those that can’t absorb the risk or afford the rent in downtown are looking to Nashville’s most popular suburbs for reasonable storefront alternatives. Mixed-Use Downtown Downtown Nashville redevelopment is a hit right now with no end in sight, which is welcomed news for well-capitalized, specialty retailers. Because of the continually rising costs of land and construction, redevelopment and mixed-use projects are the only feasible entry points for retailers in this market. One of the most significant projects highlighting downtown’s potential is the 6.2-acre redevelopment of the Nashville Convention Center: Fifth + Broadway. A high-quality, mixed-use …

March 27, 2017

Market Reports Retail Southeast Southeast Market Reports Tennessee

Memphis Retail Market is a Hotbed for Leasing, Sales Activity and Redevelopments

by John Nelson June 13, 2016

The retail market in Memphis has continued to improve over the past year with new developments now open for business and redevelopment projects popping up across the metro area. Memphis, most commonly known for its blues and barbecue, has recently become the dreamland for those looking to lease, buy or redevelop assets. Vacancy rates are falling, new tenants and stakeholders are entering the market and retail investment sales continue to be in high demand. With several new development projects in the pipeline, the metro area is looking to capitalize on the new infrastructure. Memphis, located in the southwest corner of Tennessee within Shelby County, boasts a large metropolitan statistical area comprising Crittenden County in Arkansas; Benton, DeSoto, Marshall, Tate and Tunica counties in Mississippi; and Fayette and Tipton counties in Tennessee. One of the most attractive features of life in Memphis is the area’s remarkably low cost of living, which has allowed Memphis to become the city where one eats and stays instead of eats and plays, adding increasing demand on the commercial real estate market. According to a variety of real estate professionals doing business in the area, national and international investors and developers are looking to Memphis because …

June 13, 2016

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