Nashville’s industrial market is showing no signs of a slowdown, with a recent report from Avison Young showing 3.9 million square feet of construction now underway in this busy market.
This follows a strong year in 2018 when 2.6 million square feet of new industrial space was delivered to the Nashville market.
How strong is this market? According to Avison Young’s first quarter industrial market report, Nashville is leading the country in industrial construction as a percentage of the current market. The 3.9 million square feet now under construction is mostly speculative. Just 23 percent of these new facilities have pre-leasing in place.
“Developers are backing on the explosive growth and dynamic tenant demand in the market this year,” said Sue Earnest, principal in Avison Young’s Nashville office, in a statement.
Earnest said that even with the new construction, the industrial vacancy rate in Nashville remains low. She said that 28 companies moved their headquarters to Nashville during the past four years, while several local companies expanded here, keeping the demand for new industrial space at a high level.
Avision Young said that 1.5 million square feet in new industrial construction hit the Nashville market in the first quarter of 2019. This means that most submarkets experienced at least some drop in absorption. Overall industrial vacancy, though, increased by just 90 basis points during the quarter to 4.5 percent.
Because of the dip in absorption, average industrial rental rates dropped 10 percent on a year-over-year basis to $5.37 a square foot.
“The rental rate decrease is giving some relief to tenants and potential tenants who have experienced sticker shock in the recent market,” Earnest said in a statement.
One of the bigger tenant relocations during the first quarter came from frozen slushies brand Icee Co., which moved its headquarters from California to the Nashville market community of La Vergne, Tennessee, creating 200 new jobs for the area. Other companies expected to expand or move to Nashville in the near future include Amazon, Tanger Outlets, AEG, MGM Resorts, Four Seasons Hotels and Resorts, STK, Crate & Barrel and Apple Music.
The largest industrial building completed during the first quarter was the Cedar Farms Development, a 900,000-square-foot spec warehouse.