Nashville Commercial Real Estate Vitality Index Reveals Surge in Nashville Market in First Half of Year

Nashville Commercial Real Estate Vitality Index Reveals Surge in Nashville Market in First Half of Year

By MP&F Staff

NASHVILLE, Tenn. (Aug. 13, 2019) – Nashville’s commercial real estate market surged in the first two quarters of 2019, ignoring expected recessionary trends and building on market fundamentals – such as new building permits and absorption rates – that remain strong.

This is the basic finding of the Colliers | Nashville Commercial Real Estate Vitality Index midyear report.

“A key takeaway we’ve found since we first released the Index earlier this year is that the vitality of Middle Tennessee’s commercial real estate industry shows no signs of slowing down,” said Janet Miller, Colliers International | Nashville CEO and market leader. “While virtually every business leader in the country is speculating about a potential decline of the economic cycle, Nashville continues to accelerate.”

Compared to the year-end 2018 Index, the new Index shows a 2-point uptick in the first quarter of this year, due to above-average construction permitting. The start of major downtown projects such as the Nashville Yards site and Highwoods’ commencement of the new Asurion headquarters in the Gulch all contributed to this increase. 2019’s second quarter saw a 6-point increase, attributed to an unusually high building-deliveries of 745,000 square feet in office space and 2.3 million square feet in the industrial sector. So far, 2019 has seen an overall increase of 8 points, taking the Index to a 190-point high. It’s worth noting that office investment for the first six months of the year exceeded $660 million, surpassing the totals of the last three years for that same time frame. 

“The cash that is flowing into opportunity zone investments is tremendous right now,” said Patrick Inglis, senior vice president, Capital Markets, Colliers International | Nashville. “Nashville has been pretty strategic in how those have been drawn up. You’re seeing a lot in Wedgewood Houston, and much of East Bank by the Cumberland River is going to be an opportunity zone, so you’re going to continue to see a lot of capital flowing there, and a lot of development taking up because of that.”

The Colliers Index, which was launched in January of 2019, uses key economic indicators to track the health and vitality of Middle Tennessee’s commercial real estate sector from 2001 to the present. Those indicators include job growth, population growth, building permit activity, rental rate increases, net new absorption of space, vacancies and acquisition pace. Combined, the variables then factor into a weighted algorithm that creates an accurate measurement tool to monitor Nashville’s commercial real estate sector over time. At the midpoint of 2019, the Index is at 190 points, the highest it’s been since it hit its peak in the third quarter of 2017 of 199 points. 

“Don’t bet against Nashville,” said Bert Mathews, executive vice president of Colliers International | Nashville and president of The Mathews Company. “From a commercial real estate standpoint, we’re in a great situation. We’re advising our clients to make sure they are looking forward into the future to be able to have the capital to be able to make investments.”  

In addition to reporting on the ongoing stats of the Colliers Index, the presentation, held this morning, also featured a discussion on recent commercial investment and capital markets trends. Trends identified by the panel included:

  • Real estate investments are increasing due to a continued low-yield environment with investors seeking attractive risk-adjusted return. Nashville is an attractive market for investors due to its unprecedented job growth, population growth and overall yield potential compared to the major coastal markets.
  • Nashville’s unprecedented levels of construction across all property types are meeting an equally high level of demand. It’s important to remember that the city is still several years away from reaping the full gains from recent major job announcements, including Amazon.
  • During this cycle, investors are projecting value creation based on an optimism for income growth driven by continued strong underlying economic fundamentals instead of relying on future cap rate compression or creative capital formation to achieve target returns.

The event’s discussion was led by Mathews and featured:

  • Patrick Inglis, senior vice president, Capital Markets, Colliers International | Nashville
  • Jody Moody, vice president, The Mathews Company
  • Robert Quinn, senior underwriter/originator, Argentic

Details of today’s presentation and the Index can be found at www.colliersindexnashville.com.

About Colliers International

Colliers International (Nasdaq, TSX: CIGI) is a leading global real estate services and investment management company. With operations in 68 countries, the firm’s 17,000 enterprising people work collaboratively to provide expert advice and services to maximize the value of property for real estate occupiers, owners and investors. Colliers’ experienced leadership team, owning more than 40% of the firm’s equity, has delivered industry-leading investment returns for shareholders. In 2018, corporate revenues were $3.3 billion, with more than $26 billion in assets under management.

About Colliers International │ Nashville

Colliers International | Nashville is a leading commercial real estate services firm in the Nashville area and Middle Tennessee. With over 80 years of experience and 65 professionals, Colliers’ experts specialize in providing maximum service for a full range of product lines, including landlord and tenant representation, investment sales, finance, property management, and project management. The firm currently leases and manages over 7 million square feet of commercial space and has ranked in the top four commercial real estate firms in the city for the last four years.