Nashville is now an established growth leader regionally and nationally. The city was a national trailblazer as the U.S. economy recovered from the Great Recession. That head start positioned Nashville to take advantage of broader growth trends and stay ahead of the pack as the remainder of the region and country started to grow again. Moody’s Analytics places Nashville firmly in an expansion phase, with fourth quarter employment growth 330 basis points ahead of the prior year, in-migration driving single-family housing permits up 13 percent last year and accelerating wage growth. Quoting Moody’s, “With the commercial real estate market tightening quickly, the pace of hiring will soon be contingent on how quickly new offices can be built or renovated. Yet there is still a good chance office-using employment could beat expectations, especially after 2016.” Class A buildings continue to dominate growth. Overall absorption for 2014 totaled 666,639 square feet, while Class A absorption was 689,009 square feet. Absorption exceeded construction by over 200,000 square feet, and Class A vacancy dropped from 5 percent at the beginning of the year to 3.5 percent at year-end. Vacancy that low inhibits movement, as is obvious in Brentwood with only 45,000 square feet vacant, …
The Nashville retail market continues to gain momentum. With approximately 338,773 square feet of retail construction underway, Nashville remains in a growth and expansion phase, with nationally recognized retail that offers unique options for tourists and locals. In 2014, approximately 53 restaurants opened, most notably Chauhan Ale and Masala House, Sinema, Prima, Acme Feed & Seed, Adele’s, City Winery, Two Ten Jack, Moto Cucina + Enoteca, Epice and Party Foul. Most of these landed in hot neighborhoods — The Gulch, East Nashville, 12th South, SoBro and Germantown. Nationally and locally we’re seeing demand for grocery-anchored retail. Demand has outstripped supply by a long shot. Major grocers own much of their real estate, and Publix followed suit in 2014, acquiring some centers it anchors, leaving fewer investor opportunities that will drive pricing and also move some investors into opportunities anchored by regional or independent grocers, or shadow-anchored assets. We actually expect non-retail projects to change the dynamic in Nashville in 2015. Within the Downtown loop, retail was non-existent, but with 1,000 new hotel rooms, 2,493 residential units and several new office projects under construction, bringing 5,000 more workers downtown, retail will follow. The $232.6 million Highwoods development for Bridgestone’s U.S. headquarters …
Rail, river, runway and road offer a robust quadra-modal transportation solution in Memphis, which creates an environment for on-going real estate development, investment and job growth in the region. Five Class 1 railroads operate major facilities in the Memphis metro. In recent years those railroads have collectively invested more than $1 billion in infrastructure to serve a growing customer base. Likewise, Memphis International Airport, the largest cargo airport in the U.S. and second-largest in the world, has been the center of much investment and activity. FedEx is currently adding an 88,000-square-foot, $20 million “cold-chain” facility at the airport to handle highly specialized bio-medical shipments, and UPS has recently leased an additional 26 acres on the airport property for a reported $80 million expansion of its existing Memphis airport sort facilities. Manufacturing Growth According to the Federal Reserve Bank of St. Louis, manufacturing job growth continues to outpace the U.S. with a 1 percent increase compared to 2012, while the nation only saw 0.1 percent growth in jobs overall. Manufacturers have been increasingly vigorous in the last several years, taking advantage of the go-to-market transportation infrastructure and a low-cost business environment with investments in new or expanded facilities by Nucor Steel, …
Nashville’s commercial real estate market accelerated in 2013 as both lease and sales activity reached pre-recessionary levels. A number of new development projects were announced to account for the tightening vacancy as Nashville’s economy progressed with lower unemployment than the U.S. average. It was a big year all around in 2013 as Nashville was nationally praised for its fast-growing suburbs, new businesses and careers and the much hyped up-and-coming culinary scene. Furthermore, Nashville made a solid case for its newest accolade as one of the ‘Top Markets to Watch’, by the Urban Land Institute. The city’s economy proved to be resilient and competitive with low unemployment and new businesses entering the market. November 2013 recorded 5.8 percent unemployment in Davidson County, 1.2 percent less than the national average. Low Vacancy Nashville retail is currently experiencing its lowest vacancy in years. At the end of 2013, the overall vacancy rate dropped to 7.8 percent, down from last year’s year-end vacancy rate of 8.3 percent. At the peak of the recession in 2010, Nashville recorded a retail vacancy rate of 10 percent. The recent improvement trend over the past two years is a result of the city’s low unemployment numbers and business-friendly …
E-commerce and the automotive industry drove a resurgent Nashville industrial market in 2013, and we predict another strong, steady year for absorption and investor demand this year. Perhaps the biggest question mark, though, revolves around backfilling second-generation space as its former occupiers move into new build-to-suits. This factor is indicative of robust build-to-suit activity, and while it may increase vacancy early in the year and stall speculative development, the market’s overall health and forward momentum is unquestionable. Nashville’s 200 million-square-foot industrial market closed 2013 with vacancy at 7.9 percent, down from 8.7 percent at the end of 2012, on positive absorption of 3.4 million square feet. The 55 million-square-foot Southeast submarket proved to be the region’s most active, with 1.7 million square feet of net absorption for the year and a vacancy rate of 10.1 percent, followed closely by the East, with 1.6 million square feet of net absorption and a 13.9 percent vacancy rate. Clearly, build-to-suit activity was and is king in Nashville, as it is in many markets. Four build-to-suit projects are currently underway, including distribution centers for Dex Imaging, Allied Modular, Hogebuilt and Panattoni Development Co.’s 240,000-square-foot building for medical products firm Hollister. Panattoni also delivered a …
Momentum. In a word, that’s how 2012 ended in the Memphis industrial market. Nearly 3 million square feet of net absorption in the fourth quarter of 2012 helped the market end the year with 2.3 million square feet in positive absorption — setting the tone for what we expect to be a solid 2013. The uptick in fourth quarter net absorption caused vacancy rates to fall to 12.5 percent, down from a high of more than 13 percent. But those vacancy rates can be a bit misleading when you look specifically at Class A space, where vacancy rates are at 10.4 percent. In 2009, industrial development in Memphis totaled only 743,000 square feet in combined under construction and delivered space. Things began improving in 2010 and 2011, with approximately 2 million square feet under construction and/or delivered in both years. In 2012, that number increased by 50 percent to more than 3.1 million square feet. What’s particularly noteworthy about construction activity in 2012 is that it includes speculative development, something the market hasn’t seen in quite a while. IDI has already delivered one spec building totaling 286,000 square feet and has another 870,000-square-foot spec building under construction, both in DeSoto …
The Nashville metropolitan statistical area (MSA) comprises 13 counties and a population of approximately 1.45 million, which represents a 47.2 percent increase since 1990, nearly 2.5 times the national average of 19.2 percent for the same period. With a host of world-class companies like Dell, Nissan, HCA and Sprint PCS, Nashville has become a destination for a young, progressive generation of families. Over the past decade, the Nashville area saw tremendous increases in several areas: population growth in the region has gone from 53rd in the United States to 38th and income growth in the region rose from 138th in the United States to 49th. That takes the region from five percent below the U.S. median household income average to seven percent above it. Diverse and Growing Economy The Nashville region’s economy is diverse and thriving. Low unemployment, consistent job growth, substantial outside investment, and a well-trained labor force combine to make Nashville an attractive city for business. Nashville enjoys an unemployment rate that is historically below the national average, ending the year at 6.95 percent (compared to 8.3 percent for the nation). Nashville’s diverse economic mix is led by the manufacturing and healthcare industries, followed by publishing and printing, …
The Nashville office market may have good cause to be the envy of the commercial real estate world. Despite a sluggish economic recovery for most of the United States, Nashville’s economy and office market have experienced a surge of growth fueled by a diverse business climate that includes healthcare firms, legal firms and corporate headquarters. That surge puts overall office vacancy at a 10-year low and Class A vacancy at record lows, 9.9 percent and 6.3 percent, respectively. Moreover, the types of development and transactions that are shaping the office market and economy are economic development homeruns, bringing or retaining growing firms’ corporate headquarters to Nashville and driving job growth. By any measure, 2012 was a banner year for Nashville’s office market. The CBD submarket has seen the most leasing activity, as many of Nashville’s major law firms and banks have secured homes for the next decade. Butler Snow’s deal at the Pinnacle building placed the 520,000-square-foot Class A office tower at 80 percent leased, and this building — which has the highest rents in the city — was closing in on full lease-up at the end of the year. Additionally, with the majority of downtown office space committed and …
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 …
We've all said time and again that the key to recovery in office real estate is continued and significant increase in employment rates. Like much of the rest of the country, Memphis has begun to see an uptick in employment in the professional and business sector. In the Memphis MSA, employment in this all-important sector for office real estate jumped from 73,400 to 87,100 during 2011, approaching pre-recession highs of 88,800. Additionally, on May 3, the U.S. Bureau of Labor Statistics reported that productivity in the U.S. fell at an annual rate of 0.5 percent for the first 3 months of 2012, after steady growth during 2011. This is the first sign that corporations have achieved the efficiency they desired and needed to weather the latest economic storm. As demand increases, corporations will be forced to hire to fill the gap between demand and capacity, so the good news for the market is that employment rates, the most fundamental drivers of office real estate, should continue to improve. There are a couple of black swan events, the outcomes of which will shape the immediate future of the office market in Memphis, and specifically the Central Business District. The first is …