Nashville is in a crisis. There have been numerous reports and studies to find that Nashville is an affordable housing disaster, but few have started talking about Nashville’s Office Affordability Crisis. Rarely will you hear about it, but obvious to small business owners in the market to buy or lease office space.
Nashville is a growing economy. The problem comes when businesses and start-ups here in Nashville cannot find a proper space for their business because everything they look for is priced too high.
Nashville is a growing economy.
Cycles in the economy happen, and right now Nashville is booming. But with that boom comes some problematic price hikes. Office prices have skyrocketed over the past decade. Nashville’s rent growth is at around 3.3% so far this year but has been up to over 8% once this past decade. Since this has been occurring for the better half of the decade, prices have also been rising. Like any good Supply-And-Demand model, when demand is high, the prices become higher.
This might not matter to a giant Tech firm coming to Nashville, but when a local wants to start a business with nowhere to go, it’s a nightmare.
There’s been multiple Silicon Valley-based firms setting up shop in Nashville. The Tennessean reports, “Go back to 2014 and the list includes Eventbrite, Google, Lyft, Postmates and Houzz. Among their top reasons for choosing Nashville are geography, talent and community feel. As they invest in Nashville, they are further building the local talent base and Nashville's business brand beyond health care and music.”
It’s true. There’s a lot of good to come from businesses moving here. The problem comes when Nashville becomes overpopulated with Silicon Valley companies to the point where Nashville can’t grow it’s own Silicon Valley-esque companies.
For a long time, Tennessee has been growing as a hub for companies in the healthcare and music industries. Nashville is well-known for its possibilities for startup companies, such as Hytch, Youscience, and more, but those places probably wouldn’t be able to stand now due to rising costs for office space.
Co-working space is great. Nashville has plenty of co-working options for those looking for something fairly cheap as they continue to grow. Eventually, however, companies will want to search for their own office space to expand even more. With these tech companies taking the space, Nashville’s prices have expanded more than what a startup company can afford.
“One of the main reasons most small businesses fail is that they simply run out of cash," said CEO of Enloop Cynthia McCahon in an interview with Business News Daily. They fail for a number of reasons, but when companies are starting out, cash doesn’t flow very quickly. Nashville used to be a perfect place for a company to find a space to work, but it is quickly becoming a space no one can work.
Nashville’s Office Market is at around $30/square foot, which is the highest it’s ever been. This trend doesn’t seem to be slowing down, which is a frightening thought.
"It's kind of the perfect storm," said Tim Stowell, managing member in Nashville-based Corporate Real Estate Advisors to the Tennessean. "This market makes it extremely tough for people to expand because of the cost and the lack of available space."
Here at The Cauble Group, however, we are making our office prices much more affordable than the average. Our goal is to find Class B and Class C spaces outside of the downtown area for those left behind by the downtown market. A great space is 4013 Travis Drive, a new space The Cauble Group has recently acquired and is currently renovating to take it from a Class C space to Class B.
We also have acquired a 28,000 square foot office space at 3250 Dickerson Pike. The space is also being renovated from a Class C category to Class B.
We are attempting to change how one views office space. It’s more than just an office, it’s something that can be creative and unique.
Nashville is continuing to grow each year. With that growth comes some growing pains, and one of those pains is higher costs.
Though the costs of renting office space is higher than it has ever been, the good news is it is still cheaper than a lot of the United States. Though we are not cheap, Nashville is much cheaper than places like San Francisco and New York City, where rent can be more than $81/square foot, and Midtown New York City is asking around $74/square foot.
In those terms, Nashville is still pretty cheap. Every year, however, the price continues to rise. After a while the rising prices will become unbearable for businesses in the Metro area.
So how do we combat these high costs?
Well here are a few ideas:
Zoning - “Zoning can be a powerful tool for creating a built environment that provides plenty of opportunity for local entrepreneurs,” writes the Institute for Local Self-Reliance. “Key strategies include protecting the varied fabric of established commercial districts, ensuring an ample supply of small spaces, and adopting business diversity ordinances that encourage a mix of different types of businesses.”
Setting aside space for local businesses is also a powerful tool. If brokers and investors create a space such as a business park for local businesses, they can evaluate and regulate the pricing of the rent for the park.
This problem is something Nashville is going to be dealing with for a long time, simply due to the growth of the city.
But there are ways to fix it. The Cauble Group wants to help with every business to find a perfect space.