In 2018, Nashville continued experiencing unprecedented population growth. Major job announcements, rising home prices and income growth have led to a shift in renters-by-choice. This has continued to transform our urban core and has had an immense impact on various industries within the city.
On the investment side, multifamily assets in the market demonstrated some notable pricing trends through year-end 2018. The median price per unit in Nashville increased by more than 14 percent from fourth-quarter 2017 to fourth-quarter 2018, reaching $145,000 compared to $117,000 in the Southeast and $162,000 across the nation. This comparison demonstrates how Nashville is a highly valued market in the Southeast but remains attractive from a pricing standpoint to national investors looking to acquire quality product.
Brad Boston
Associate,
Cushman & Wakefield
What was an increasingly concessionary environment in 2017 and 2018, the Nashville multifamily market will tighten throughout 2019. Large-scale job announcements like AllianceBernstein, Amazon and Ernst & Young will bring thousands of jobs to Middle Tennessee. These announcements will help ensure that the recent trend of high absorption will continue through the year. Demand in Nashville has been strong relative to the historical average, but supply has outperformed demand in the past year due to new construction of much-needed apartment supply. We anticipate the fundamentals continually improving each quarter in 2019.
Moody’s Analytics projects that in the next five years, Nashville’s employment base will grow by more than 67,000 net jobs and unemployment will remain at 4.0 percent or below, indicating that the metro could use more in-migration to accommodate job growth. In the past five years, the metro added more than 185,000 net jobs, which
Robbie O’Bryan
Director,
Cushman & Wakefield
means that the metro added six jobs for every multifamily unit delivered. With this kind of job-to-new construction ratio, multifamily demand remains robust.
Nashville has seen one of the most aggressive pipelines in the country in the past year. West End/Central Business District (CBD) will continue its popularity but will likely see lower rent increases due to the supply in the area. However, Nashville’s suburbs and secondary markets remain extremely popular. According to research from CoStar Group, Murfreesboro has seen some of the strongest and consistent growth, which has started to naturally slow as landlords are capping out on being able to sustain this rate of growth. Sumner County has also seen a wealth of supply deliver in 2018, and there is a lot left to build, which has caused competition to be stiff.
The metro is projected to add 19,000 renter households from 2018 to 2023 per Experian data, while the construction pipeline will begin to wane in 2020. When comparing rent growth rates in 2017, key submarkets with rising rent growth rates in 2018 are Wilson County, Donelson/Hermitage, Madison/Rivergate, Maury County, Bellevue, Williamson County and Southeast Nashville, according to CoStar.
Look to the following submarkets to continue their popularity in 2019:
Davidson County. This county will remain extremely active throughout 2019. Middle Tennessee and Davidson County have consistently ranked as a national leader in inventory for over a year. Nashville’s diversified economy, healthcare industry, tourism and labor force will continue moving the apartment market forward.
The area has become a millennial magnet, which is the prime renter-by-choice demographic. Apartment completions over 2019 will remain elevated, but we anticipate that demand will keep pace as new employers continue to relocate to the area.
Wilson County. Responding to strong population growth, this county has doubled the apartment inventory since 2014. The submarket benefits from desirable public schools and low home prices. Blue chip employers based in Wilson County drive local job growth, such as Under Armour, Nissan and Cracker Barrel, with 3,000 employees combined.
Strong net absorption has kept vacancies down in the past year. Revere at Barton’s Run (420 units) in Lebanon opened with high demand and no concessions were offered during lease-up.
Williamson County. This county retains its status one of the most desirable suburban locations in the state. The area is known for its high performing schools, strong business environment and a wide range of retail options.
The area is the corporate submarket of the Southeast, containing the highest concentration of corporate headquarters including Community Health Systems, Nissan North America, Verizon Wireless and Schneider Electric. Aetna also recently announced plans to add 200 employees to its new office within the Berry Farms development over the next few years.
CoStar reports Williamson County is one of the fastest growing counties in the country, with population gains of over 15 percent over the last five years. This county is also among the 20 wealthiest in the nation, and median household incomes are close to $90,000. Rents here are one of the highest in Nashville, just behind West End/CBD, and have increased by almost 15 percent since the previous cycle’s peak in 2008.
— By Brad Boston, associate at Cushman & Wakefield, and Robbie O’Bryan, director at Cushman & Wakefield. This article originally appeared in the February edition of Southeast Real Estate Business.