From 2015 to 2016, no other large metropolitan area in the country saw a bigger increase in employment than did the Nashville area. Not surprisingly, then, this area’s industrial market remains a particularly hot one.
According to the third-quarter industrial report for Nashville put together by Avison Young, about 1.5 million square feet of new industrial construction was delivered to the metropolitan area in the third quarter of 2017. That brought year-to-date industrial deliveries to a healthy 3.3 million square feet.
In a sign of how strong this market is, the two largest third-quarter completions were speculative projects. In the Wilson County submarket, HSA delivered 650,000 square feet at Commerce Farms, with 57 percent of the space pre-leased to GEODIS. In the Southeast submarket, the first building within the Airport Distribution Park was completed, adding 617,760 square feet of space that is fully leased to NFI.
The industrial market absorbed 965,765 square feet during the quarter, marking the 14th consecutive quarter of positive net absorption in the overall Nashville market. The Southeast submarket was particularly strong, with more than 2.8 million square feet of positive absorption recorded.
The overall industrial vacancy rate dropped to 4.2 percent during the third quarter, down 10 basis points from the second quarter. Nashville’s warehouse vacancy rate fell 10 basis points to end the third quarter at 4.3 percent. Flex vacancies fell by 20 basis points, reaching 3.6 percent.
With low vacancy rates, industrial asking rents have risen. The market enjoyed an average market asking rate of $5.63 a square foot in the third quarter. The Wilson County submarket saw an unprecedented 63 percent year-over-year jump in average asking rates, mostly because of the newer inventory hitting the market.