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

Nashville's Industrial market has been booming for years and hasn’t slowed. With the Amazon campus coming, and many other businesses headed for Nashville, it would make sense to not see this boom slow anytime soon.

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%.

There’s broad employment growth in all sectors - such as Construction (7.6%), Leisure and Hospitality (4.9%) and Government (2.5%).

The Nashville Industrial Market

Nashville’s Income growth is slightly above the national average at just under 4%.

Population Growth is starting to slow but is still incredibly strong overall, around just above 1.5%, whereas the U.S. Population growth is steady at roughly .6%.

Online Sales are taking over the market with all total retail sales at just under 10%, but we are still far behind much of the developed world in E-commerce such as China (23%), UK (19%) and South Korea (16%).

Vacancies have risen from 3.4% to 4.1%, and as of right now stand at roughly 4.8%. Net Absorption has also risen from 38,000 square feet (sf) to 100,000 sf. Annual Growth Rent has shrunk from 10.2% to 8.0%. Deliveries have grown from 1.1mil sf to 1.9mil sf. Under Construction has also shrunk from 5.2mil sf under construction to 4.7mil sf. Sales have gone down from $416mil ($70/sf) to $133mil ($61/sf).

Vacancies are still ticking up at around 4.1% but remain lower than the average since 2000, which is at roughly 7%. Nashville’s Supply-and-Demand are at roughly 5% in Demand and 8% in Supply. Logistics Vacancies have risen to just above 6% over the past year, which is due to a new Supply, but Specialized Industrial Vacancies and Flex Vacancies are about the same at 2%.

Nashville’s Construction levels are still well above the historical average. Right now, Nashville is at just under 5mil sf under construction. Spec Space dominates the market with just about 4mil sf under construction.

The Southeast dominates the market with 7.5mil sf.

Construction still remains heavy in the Rutherford County market.

Spec Space has done well overall, almost tied with the national average at just about five average months vacant.

Recent Deliveries are Cedar Farms, with 902k sf available, Speedway Industrial Park Building 1 with 689k sf available and Airport Business Park Building 3 with 56,404 sf, with only 25% available.

More space is on the way with Midway840 coming in 19Q3 with 689,440 sf coming and Beckwith Farms Building 8 with 458,136 sf available.

Rent Growth remains strong at 7.3%, but that is down from last year’s 10.2%. Heavily built submarkets are still seeing high growth anywhere from 6.4% to 7.6%.

Nashville is experiencing high cumulative growth, well above many other rising cities. Nashville has a cumulative growth at around 160 which is better than Denver (155), Inland Empire (147), Dallas - Fort Worth (135) and Charlotte (132).

Nashville’s Square Foot pricing remains high at roughly $60/sf. Same Store Series is trending upwards towards $70/sf.

Some notable sales are the Couchville Building 1 by the Sansone Group at $23.6mil ($33/sf) and 9534 Eubanks Road, Portland, TN by QS/Togo at $5mil ($46/sf).

Looking Ahead

Employment growth is expected to slow to just about 1% by 2022. Vacancies look to trend upward to just under 6% by 2022. Rent Growth might also compress by 2022 to about .6%.

All Statistics and Data courtesy of Costar