Nashville’s Growing Industrial Pipeline Limits Available Sites, Labor
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 would not have been built here in a year were it not for e-commerce.
And why is this product type largely being built in Nashville’s southeastern suburbs? Logistics plays a part, but so does the fact that developers can find more reasonably priced land without venturing too far outside of town. For example, in the second quarter of 2017 Panattoni delivered CentrePointe Distribution Park Building B, a speculative 601,520-square-foot building. The facility was later occupied by Ebuys, now DSW Inc., in an effort to accomplish more online fulfillment.
Not long ago, the sites where towers are being completed in the expanded central business district were once hybrid, smaller scale industrial properties where wholesale suppliers, plumbers, electricians and general contractors operated with convenience to any jobsite in the city. The rise of repurposing and vertical redevelopment of obsolete properties has changed the makeup of this area. For example, Sun Development & Management Corp. has proposed an 11-story hotel where Johnstone Supply used to operate at 501 Third Ave. S.
Service providers looking for operating space today have fewer in-town options. While a market net-lease rental rate for a flex building may be an annual $9 per square foot, it may be easier to explain to a new tenant that same rent as a function of monthly dollars per on-site vehicle that needs to be parked.
Nashville’s economy has allowed the market to keep up with the influx of new residents, rising rents and record levels of deliveries. The main thing for the market is the need for a qualified workforce to handle new construction and adaptive reuse projects. All told, supply should meet demand in the long run in both labor and property markets.
— By Billy Gibbs, Vice President, Avison Young. This article originally appeared in the February 2018 issue of Southeast Real Estate Business.