With a staggering number of tower cranes at work every day, Nashville has delivered a record number of multifamily units, office space and hotel rooms in the past several years. Even with all this development and with tourists flocking to downtown seemingly every week of the year, one category has lagged: new retail downtown.
To provide a snapshot of growth in downtown Nashville, the number of residential units downtown has grown from 3,700 in 2010 to 11,800 today. Hotel room rates since 2008 have virtually doubled, and we currently have 1.6 million square feet of office space under construction. But even with all this explosive growth, retail development downtown has lagged. Many would wonder why, and there are a number of reasons.
Historically, many developers have seen downtown Nashville as an afterthought to include ground-level retail in their projects. Because of this, small amounts of retail were metered onto the market. This retail space was geographically spread out over a number of developments across downtown. This did not lead to a rich consumer experience, because consumers strongly prefer finding retail options in a concentrated environment. Another challenge to building great retail has been the limited scale of individual projects.
Austin Benedict
Vice President,
CBRE
But this lack of retail is about to change in a very big way, and many of these real estate developments are already in motion. In particular, there are three mixed-use projects which will supply the bulk of this new retail to downtown Nashville.
This first of these projects is Fifth + Broadway. In addition to its 25-story office tower and 379 residential units, Fifth + Broadway will also boast 200,000 square feet of new food and beverage (F&B) and retail space.
The second project, just four blocks west, is AEG’s development of a 4,000-capacity venue for concerts and other performances (AEG’s specialty), as well as a 325-room hotel and 120,000 square feet of space that will be leased to entertainment users and F&B operations. AEG’s development is occurring on four acres of the 14-acre former Lifeway Campus.
The larger 10-acre portion of the former campus is the setting for the third and largest project, Nashville Yards, master planned by Southwest Value Partners. Nashville Yards garnered the attention of every Nashvillian when in November 2018 a large e-commerce company committed to finalize a deal that will put 5,000 workers in over 1 million square feet of new office space in the project.
Along with the capacity to host several million more square feet of office tenants, as well as hundreds of future apartments, Nashville Yards is also scheduled to include approximately 120,000 square feet of F&B and retail space. In addition to these three projects, the Gulch and other areas of downtown will see more retail space rollout from both local and out-of-state developers.
Despite the 375,000 square feet of new retail scheduled for delivery in 2020 and 2021 in these three projects alone, the market should not be concerned about producing a sudden oversupply of retail space downtown. Pent-up demand for retail is finally being satiated, and in the best possible way — with large-scale projects that put a mass of retail in a concentrated area, rather than lightly sprinkled across downtown.
Data so far confirms there is demand on the other end of this new supply; the three highlighted projects are being handily preleased and at rental rates that are catching up to the rates previously boasted only by the honky-tonks located in Nashville’s Lower Broadway entertainment district. Additionally, these projects capitalize on the vein of consumers who are already present downtown.
The addition of AEG’s concert venue is in response to market demand due to countless sold-out shows. Fifth + Broadway is located at the mouth of tourist traffic that packs downtown every weekend. And Nashville Yard’s future retail and F&B will appropriately respond to the forthcoming needs of a new 5,000-employee workforce.
As future developments look to respond to the needs of downtown Nashville, expect to see less-exciting but necessary retail uses coming. According to a third-quarter 2018 retail snapshot report from the Nashville Downtown Partnership, respondents named the following three uses at the top of their wish list: more grocery and produce options, a movie theater downtown and additional soft good options.
What do these responses say about Downtown Nashville? We are more than a downtown where people choose to work and to play; we are also a downtown where people have chosen to live. If developers can respond to this and fill in market gaps with amenities that consumers desire, we will keep moving closer to becoming the 24/7 city for which we have so much potential.
By Austin Benedict, vice president of CBRE. This article originally appeared in the February issue of Southeast Real Estate Business.