Q4 2022 Industrial Real Estate Report: Nashville, TN
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Nashville is known as the home of country and bluegrass music. The city is supported by major industries such as healthcare management, finance, and automobile construction.
Unemployment in the city declined quarter-over-quarter from 2.4% to 2.3%, even further from the national average of 3.5% in Q4 2022.
From 2021 to 2022, the metro population grew by 21,000 residents, a 1.62% increase.
Industrial real estate in Nashville held a constant vacancy rate, had an increase in positive absorption, and saw asking rents increase.
General Area Overview & Demographics
Nashville, the capital of Tennessee, has an estimated population of 692,587 people. 50.2% are White or Caucasian, 28.3% Black or African American, 8.9% Hispanic or Latino, 4.7% Asian American, 1.5% multiracial, 0.3% Native American or Alaskan Native, and 4.1% of other races.
Nashville Median Household Income & Population
About one-quarter of households in Nashville earn under $25,000, and another quarter earns over $75,000. The median household income is just over $54,000, less than the national average of $57,652.
The largest age group is 25-44 at 29.7%, followed by 45-64 at 26.9%. The population’s median age is 35 years, which is slightly lower than the national average of 37.8 years. There are also significant proportions of people under 18 (24.2%) and over 65 (14.9%).
Vanderbilt is the largest university in Nashville, with over 12,000 students. Other universities in the city include Belmont University, Tennessee State University, and Lipscomb University.
Historic landmarks such as the Tennessee State Capitol and Fort Negley Park are popular tourist destinations. Other popular attractions include the Country Music Hall of Fame, the Grand Ole Opry, and the Belle Meade Plantation.
Nashville enjoys a mild climate with four distinct seasons. Winters are typically cold, with temperatures averaging around 45°F. Summers are hot and humid, with temperatures reaching the 90s and an average of 50 inches of yearly rainfall.
Summary of Nashville Industrial Real Estate Performance in Q4 2022
Overall industrial vacancy in Nashvile remained around 3% throughout 2022. The East submarket recorded the highest vacancy at 4.6%, while West had the lowest at 1.4%.
Southeast and North were above the average at 3.4% and 3.7%, respectively.
Industrial CBD average vacancy rate was 1.6%, while 65 South was at 1.8%, both below the average rate.
Net absorption was positive in Q4, with 2.6 million square feet absorbed. That brings the annual total for 2022 to 7.9 million.
Given its low vacancy, West’s submarket had no absorption for the quarter. Nashville’s North submarket reached 1.14 million square feet absorbed.
What are industrial rents like in Nashville?
Average industrial rent in Nashville grew to $7.16 per square foot in the fourth quarter, while Q3 recorded an average rent of $6.30.
65 South saw one of the hightest rents: $12.07 per square foot, with Industrial CBD close behind at $10.10.
North posted the lowest at $3.79. Overall, industrial rents in Nashville increased to their highest price for all of 2022 in the fourth quarter.
Purchase & Leasing Activity
Sales activity for Nashville’s industrial real estate grew to its highest level in 2022, reaching nearly $1.2 billion. This marks a 22% year-over-year rise.
Along with volume, sales price peaked at $112 per square foot.
There were over 1.7 million square feet of leasing activity in Q4 of 2022, bringing the annual total to around 8.8 million square feet.
East and Southeast were the most significant contributors to the annual total, accounting for 3.9 million and 3 million square feet, respectively.
Notable Industrial Real Estate Deals in Nashville in Q4 2022
There were several deals for Nashville’s industrial real estate.
- Prologis purchased 1.9 million square feet for $101 million.
- McNeilus Corporation leased 844,000 square feet.
- HD Supply Facilities Maintenance leased 317,000 square feet.
- Armstrong leased 107,500 square feet.
These are select examples among other activity.
New Industrial Real Estate Development Activity in Nashville in Q4 2022
New deliveries reached 4 million square feet in the fourth quarter of 2022.
Wilson County provided more than half of this inventory, contributing nearly 2.5 million square feet. Southeast accounted for the remainder.
Annual total for completions reached 8.4 million, with Wilson County making up nearly 5 million.
This leaves about 13.4 million square feet of product in the pipeline at the close of 2022.
Market Forecast for Nashville’s Industrial Real Estate Market
While rising costs, increasing interest rates, and economic uncertainty delayed some projects, new builds are still breaking ground.
Nashville’s industrial real estate market will continue its growth trend seen throughout 2022, with 2023 set to bring over 9 million square feet of new industrial real estate online.
Most of the new activity forecasted for 2023 will occur in Wilson County and Southeast submarkets.
Vacancy will continue to hold steady as demand remains higher than supply.
Takeaways for Industrial Real Estate Investors
Nashville’s industrial real estate performed well in Q4 2022, and the city still remains to be one of the most prosperous in the country.
With promising indicators like steady vacancy, high demand, rising interest, and increased absorption coupled with a growing population and low unemployment, Nashville industrial real estate should remain in demand.
Stay diligent, do your research, and happy investing.
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