Q3 2022 Multifamily Real Estate Report: Nashville, TN
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Q3 of 2022 brought cooling to Nashville’s multifamily market, seeing rents and occupancy decrease.
It’s common for economic slowing to cause a lull in markets that were previously experiencing high growth.
The change in the economy created a pause in buyers while new inventory had already been added to the construction pipeline, causing supply to outpace demand.
Over 2020 and 2021, the local labor market experienced significant growth bringing unemployment down to 2.5% at the beginning of 2022, but the third quarter only provided a net increase of 1,000 new jobs.
While this stalled the market, Nashville will likely resume a healthy positive trend.
General Area Overview & Demographics
Nashville is an iconic city in Tennessee with a population of approximately 654,610 people. This vibrant city has a thriving music, art, and culture scene and a downtown full of restaurants and shops that locals and visitors enjoy.
According to the 2010 U.S. Census, 57.2% of the population is White, 25.7% is Black or African American, 8.3% is Hispanic or Latino, 4.4% is Asian, and 0.4% is Native American or Native Hawaiian/Pacific Islander.
Nashville Education & Climate
It’s home to several higher education institutions, with Vanderbilt University being the city’s premier university and consistently ranked among the top universities in U.S. News & World Report.
The city has a humid, subtropical climate with mild temperatures year-round. In the winter, temperatures typically range from the mid-30s to the low 40s Fahrenheit during the day and can drop as low as the upper 20s at night. In the summer, temperatures often rise into the high 80s and fall to the low 60s Fahrenheit.
Summary of Nashville Multifamily Real Estate Performance in Q3 2022
Vacancy rates increased for the fourth quarter in a row, rising 0.7% from Q2 to Q3 and reaching 5.3%
Local vacancy was up 1.5% in 2022 compared to 2021. However, it was still trending below the historical average of approximately 5.7%.
Affordable Class C properties saw the lowest vacancy, averaging around 4.6%.
During Q3 2022, it was projected for the rate to finish the year at 5%.
What are multifamily rents like in Nashville?
After sharp increases in asking rent for six consecutive periods, Q3 saw rent decline by 2.5%, bringing the average cost to $1,674 per month. Despite this activity, Nashville multifamily rent was still higher in 2022 than it was in 2021.
Nashville was performing lower than the national average of $1,718 per month.
The rent for higher-tier Class A properties was nearly $2,000 monthly in the third quarter.
Purchase & Leasing Activity
Though rent was down for Nashville’s multifamily property, there was an increase in sales activity as volume rose 30% from Q2 to Q3.
The drive-in activity brought up the average sale price by 50% year-over-year. Q3 2022 saw a median sales price of around $265,000 per unit.
In addition, cap rates were up, averaging 4.5%.
Notable Multifamily Real Estate Deals in Nashville in Q3 2022
Several notable office deals and leases occurred for multifamily real estate in Nashville. These include:
- Overall Creek Apartments sold for $104.5 million at $272,005 per unit.
- The Union sold for $96.5 million at $340,989 per unit.
- Waterford Place of Murfreesboro sold for $53.2 million at $289,402 per unit.
These are among other notable sales transactions and leases.
New Multifamily Real Estate Development Activity in Nashville in Q3 2022
Approximately 2,400 units were completed.
There were over 20,500 units under construction, a 5% increase year-over-year.
Downtown submarkets accounted for almost 50% of multifamily real estate in Nashville being developed.
Though deliveries picked up the pace, permitting was down.
Market Forecast for Nashville’s Multifamily Real Estate Market
The forecast looked positive even amid cooling indicators.
Being one of the fastest-growing cities in America, the most significant contributor to Nashville’s multifamily market is population growth.
Overall, when looking at historical trends, Nashville held a healthy performance even with Q3 seeing a decrease.
It is still one of the best growth markets across the nation and will continue to attract significant investment.
With several projects on track to become available in the city’s center, this will likely be a place for investor activity.
Takeaways for Multifamily Real Estate Investors
Skilled investors will recognize that no market perpetually climbs high. After significant rises, stalls and dips are expected.
Nashville underwent a cooldown in Q3, but there are no broader indicators that it will stop being one of the nation’s top performers.
Do your due diligence and invest wisely.
Find Multifamily Real Estate in Nashville With Help From a Local Agent or Broker
MyEListing.com maintains one of the largest databases of commercial real estate agents & brokers in the country. Use it for free to find commercial real estate agents & brokers in Nashville.
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