Nashville Industrial 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 INDUSTRIAL MARKET
From quarter two to quarter three of 2019, industrial vacancies have decreased from 4.8% to 4.1%. Nashville’s vacancy rates are holding at a near record low and are continually decreasing. With the rise of e-commerce and online shopping in the US, industrial products like warehouses and logistics centers are becoming more and more crucial for product distribution.
Large warehouses (100,000 square feet or more) specifically are the key driving force behind these vacancy rates. Three current leases at Cedar Farms, Speedway Industrial Park, and Airport Business Park account for over 400,000 square feet alone.
During Q3, construction in the Nashville industrial market remains elevated and competitive. New construction projects are largely a homogeneous stock. 77% of industrial products currently under construction are sleek, modern logistics centers over 100,000 square feet. Nashville is expanding inventory at a fast pace and ranks 10th in all sunbelt metros of percentage of inventory under construction. A large portion of this inventory is spec space. However, most new industrial construction is taking place mainly in submarkets like Rutherford, Wilson, and Murrary Counties.
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Recent ground breakings include Speedway Industrial Park Building 3 (over one million square feet) and Building 4 (445,000 square feet) in Wilson County and a proposed 3.5 million square foot industrial park in Mount Juliet.
Rent growth in the Nashville industrial market this quarter continues to outperform the national average. Rent growth in surrounding areas of the Metropolitan is increasing at a faster rate than Metro itself. For example, Wilson, Robertson, and Hickman counties all surpassed Metro in cumulative rent growth over the past five years.
Investments in the industrial market remained strong in 2019, and the third quarter is no exception. Asset pricing continues to trend upward. From an investment perspective, owner/user deals have proven to be favorable. For example, Rooms To Go and USPS both recently purchased large warehouse spaces.