As regional managing principal for the Nashville office of Cassidy Turley, Doug Brandon considers himself fortunate. He lives and works in a city that has weathered the country’s economic storms as well as any similarly sized market. Brandon recently spoke with Midwest Real Estate News about the reasons behind Nashville’s resiliency.
Midwest Real Estate News: Are you seeing more commercial real estate activity these days in Nashville? And if you are, what are the reasons? Doug Brandon: We are seeing a lot more activity, especially from the institutional end. We are getting lots of inquiries. We are seeing lots of people testing the waters. Nashville is a very attractive market for a lot of reasons. The diversity of the business community helps. Being a state capital helps. The healthcare market we have is a strong one. We have a huge healthcare presence here that drives a lot of our real estate activity. We have an active tourism market. It’s just a very diverse city. It’s not like some cities where you have all your eggs in one basket. We benefit from a lot of economic drivers.
MWREN: Tennessee no longer has an income tax. How has that helped the commercial real estate market? Brandon: Our state government has always been very aggressive with trying to attract companies to come to Nashville. Having no income tax here is now is also an extremely beneficial thing for us. It really helps the city in attracting new businesses. That’s not the only positive here, though. You are close to the mountains and the beach here. The housing and schools are good. There are a lot of factors.
MWREN: How has Nashville fared during the toughest of economic times? Brandon: We’ve done OK during tough times. From 2009 to 2010 our city’s GDP was up 5-and-a-half percent. That’s a great indicator. Most large or medium cities have taken a big hit in that area during the last couple of years.
MWREN: Are any particular commercial sectors outperforming others? Brandon: The office sector is doing very well. We were going over the numbers yesterday. Our inventory here is very tight. We haven’t had anything new come out of the ground in two-and-a-half years. Five of our eight sub markets are below 10 percent vacancy. That is very appealing for the buy side. I think that is why we are getting a lot of institutional interest. Institutional buyers are seeing that the inventory in Nashville is tight. They think that rents are going to be pushed up a little bit. These investors are ready to step in and look at assets that might be a little undervalued.
MWREN: What about the industrial market in the city? Brandon: We still have a lot of vacancies on the industrial side. Through the end of the second quarter, our industrial vacancy rate was about 11 percent. When manufacturing slows down, everything slows down. It has stabilized, though. It has not gotten worse in the last six to eight months. We have, though, had a tough couple of years on the industrial side. When you are competing with Memphis and Atlanta, which are big hubs for distribution centers, it’s not easy. Companies look at us and wonder if they need a presence in Nashville and Atlanta now with business being so slow. This is especially the case with gas prices doing what they have been doing.
MWREN: What do you see for the future of the commercial industry in Nashville? Brandon: I think we will see more activity. There is a lot of talk about some new projects coming out of the ground. We don’t have any large blocks of space left in Nashville, especially on the office side. As far as spaces totaling 50,000 feet or more, there are none here in the Class-A market. There have been a couple of announcements for new projects. There has been lots of speculation. But not having any new inventory in the last couple of years, the only real vacancy we have in the office market is downtown. We are optimistic that the institutional investors will continue to be attracted here.
