Nashville Office Market Update Q3 2019
ECONOMY
The third quarter 2019 saw Nashville continuing to outperform National averages. With job growth y/y at about 3% in Nashville, the National average sits at closer to 1%.
Unemployment continues to trend downward, with Nashville again outperforming the National average at close to 2% and 4% respectively.
Unsurprisingly, Nashville’s population growth also continues to beat out the National numbers. While not as high as recent years, Nashville still welcomes about 80-85 new people a day.
The two major age groups most contributing to this population growth range from 20-34 years of age, over 10% growth, and 65+ years of age, over 20% growth.
NASHVILLE OFFICE MARKET
From quarter two to quarter three of 2019, office vacancies have decreased from 6.1% to 5.9%. 1 & 2 star properties continue to plateau at about 4%, while 3 star properties sit at just over 6%, and 4 & 5 star properties trend towards 8%.
Across the same time period, net absorption significantly decreased from 885,000 sf to 175,000 sf.
Annual rent growth, while still strong, has also dipped. 19Q2 boasted rent growth 4.4% with 19Q3 reporting at 3.3%.
Delivery of new office space also significantly shifted, with 900,000 sf delivered in 19Q2 and 36,000 sf delivered in 19Q3.
Conversely, more office space is under construction now than compared to 19Q2. With approximately 1.3 million more square feet than last quarter, Nashville is waiting on the completion of 7.1 million sf new of new office space.
Office sales remained somewhat stable at $202/sf through 19Q2 and $199/sf as of 19Q3.
Also of note, available sublet space has reached a new high by surpassing 1 million sf.
Among the two largest office leases of 19Q3 were Concord Music, taking 60,000 sf of the Peabody Plaza, and of course Amazon, who has signed on for over 1 million sf at the Nashville Yards.