Nashville’s economic growth has remained positive throughout 2011, strengthening Nashville’s position as one of the more resilient and dynamic metropolitan areas in the southern U.S. Through August of 2011, the metro has recovered more than half of the jobs lost during the recession, having added nearly 22,000 jobs since the beginning of 2010. Currently the unemployment rate in Nashville is hovering around 8.4 percent, compared with 9.1 percent at the national level.
The area has become a prime relocation destination for major corporations, bringing well-paying jobs to the area. In 2009, Nissan relocated its headquarters from Los Angeles to Cool Springs, and now employs more than 1,300 people. Amazon recently announced two new major facilities that will bring more than 1,500 jobs to the area. GM plans on restarting assembly at its Spring Hill plant, creating 1,700 jobs as part of the new labor deal. The area has become more than just the country music capital. It is now a hub for higher education and healthcare, as the three largest employers are Vanderbilt, HCA and St. Thomas Health Services.
Like many markets across the U.S., the Nashville multifamily market has now rebounded beyond pre-recession levels in terms of both occupancy and rents. There has been little supply delivered to the market during the course of the last few years, with just over 1,000 units slated for delivery in 2011. That fact, coupled with relatively strong job growth and reduced homeownership rates, has led to a rapid recovery in the Nashville apartment market. Average asking rents in the market hit their low in 2008, but have since grown nearly 7 percent on average, with the top submarkets growing between 10 to 15 percent. Vacancy has improved from its low of 90.2 percent in 2009, to an average of 93.4 percent, with well located Class A and B assets experiencing rates of 95 percent and above.
Now that fundamentals have firmed up, developers have taken notice. There are currently 1,300 units expected to come on line in 2012 and close to 1,500 units slated for 2013. In addition, there are 3,200 units in the planning or proposed phase. The bulk of the concentration of these new projects is in the Franklin/Brentwood market and the West End/Downtown market, which includes the master-planned community The Gulch. These new units will certainly test the depth of the top end of market, but for the most part they are in areas where demand is at it’s highest.
Through October 2011, there have been nearly $300 million in transactions. Notable transactions include a 170-unit infill project known as 1700 Midtown, which fetched over $161,000 per unit or $27.37 million, a record setting price in the city. Several Class A suburban properties have traded for 5.5 to 6.0 percent cap rates. Recently, CBRE brokered the sale of a 300-unit property in Hendersonville called Aventura at Indian Lake Village for $111,000 per unit or $33.3 million. In summary, all signs are positive for the Nashville apartment market, and we expect to continue to see strong fundamentals and increased transaction volume in the coming year.
— Russell Oldham, vice president of CBRE’s Multi-Housing Group in Nashville