Industrial developers are betting on Nashville in a big way. The latest research from Avison Young says that 3.9 million square feet of speculative industrial construction was underway in this market at the end of the third quarter.
The overall industrial vacancy rate here is just 3.6 percent, Avison Young reported, with 1.8 million square feet absorbed year-to-date as of the end of the quarter.
The reason for this activity? Businesses are eager to locate in Nashville, one of the faster-growing cities in the country.
“Our city’s diversified economy is attracting a record number of new businesses,” said Sue Earnest, principal in Avison Young’s Nashville office.
Earnest said that the population of Nashville is expected to grow by about 1 million during the next 20 years. As new residents move in, so will new businesses.
The growing demand for industrial space has led to soaring asking rents here during the last five years. Avison Young reported that asking rents on all available industrial space is $5.58 a square foot, up 3 percent when compared to the same period last year.
More than 1 million square feet of new construction was delivered in the Nashville market during the third quarter. Most completions were in the Southeast submarket, where the largest project in the third quarter was a 517,000-square-foot building at Interchange Center. Also under construction in the same submarket is the master-planned Park 24 Industrial Park. Four speculative buildings totaling more than 850,000 square feet are now being built in this park.
Investment sales activity was strong here, too, rising to $262 million during the third quarter, according to Avison Young’s research. A large part of this volume came from Prologis’ acquisition of DCT Industrial Trust, which included 450 properties across the country. This included the Nashville properties of Commerce Farms I and II, Rockdale Distribution Center and Mid-South Logistics IV.