CRE Market Update: State of the Nashville Retail Real Estate Market Q1 2019

Nashville has some amazing retail spaces. Everything from clothing to cars, the retail market in Nashville is strong. With the announcement of a sect of Amazon HQ coming to Nashville, Retail remains strong.

The National Market

The United States remains strong in employment growth, just under 2% year over year, but Nashville is above the national average at just under 4%.

The Nashville Retail Market

The Income growth of Nashville is starting to increase from 2018, right under 4%, and just slightly above the national growth.

The population growth of the city is starting to slow but is still strong. Nashville has been booming for years and had the strongest population growth in 2015 and 2016, at roughly 36,000 migrating here. In 2018, Nashville added just under 30,000 with just above 1.5% year to year.

The buying power of Nashville remains strong in more urban areas, but still strong everywhere. Directly downtown has a buying power per square mile of roughly $96.5mil.

Consumer Confidence is continually rising and has been since 2010 after the flood. Right now, confidence is at around 100.

Vacancy has gone down since Q4 of 2018, standing then at 3.2% and now at 2.9%. Net Absorption has drastically increased since Q4 last year, being in the negative at -192,000 square feet (sf), now at 470,000 sf. Annual Rent Growth has gone down since Q4, then at 5.9% and now holding at 5.1%. Deliveries have almost doubled, then being at 87,000 sf now at 173,000 sf. Nashville is split what is Under Construction, standing at 1.3 million sf. Sales have also gone up, up to $293mil at $204/sf.

There is more demand than supply in retail space in Nashville, but that also continues to drive vancancies lower, because the spaces are being bought up.

Construction remains high due to the demand. Nashville has almost 1.3mil sf being constructed this year, and the construction has spread throughout Nashville and into the suburbs that surrounds the metro area.

Mixed-use projects are the big additions this year, such as 1200 Broadway and McEwen Northside.

Rent Growth remains strong just over 3% in Nashville, compared to roughly 1% nationally. Nashville is fourth nationally in Rent Growth, behind Orlando, Tampa and Sacramento.

Nashville has well-above average cumulative gains at roughly 132. Nashville is also leading the country in cumulative growth, where the second-best is Denver at roughly 127.

Nashville Sales Volume is just around $300mil with an average square footage price of $230/sf.

Cap Rates are continuing to compress at just around 6.5%.

Some of the biggest retail deals so far have came from 200 Broadway where Cotton Eyed Joe resides at $18.5mil. Another deal is 401 Broadway where Merchant’s is located with a cost of $12.6mil.

Looking Ahead

Nashville might see a slow in employment growth and vacancies start to rise as demand slows. Rent growth might also compress over the next few years. Rents are set to surpass the national index the rest of this year.

All statistics and information courtesy of CoStar