Nashville’s office sector ended 2014 on a strong note to remain on the national radar. The demand for Class A office space shows no signs of slowing down in both the urban and suburban markets, and the vacancy rate for Class A office space in the metro area continued to decline, reaching 3.5 percent overall, according to JLL’s new Nashville Office Insight Q4 2014 report.
Due to the steady drop in vacancy rates, rental rates for Class A space continue to increase and are now at $24.66 per square foot, compared to $24.21 per square foot in the third quarter. The rate is also proof of the significant progress the office market has made when compared to the same period in 2013, when Class A vacancies stood at 7.7 percent.
Nashville’s Downtown office market closed the year with a Class A vacancy rate of 5.1 percent, showing a slight increase from the third quarter mark of 5.0 percent.
The 2014 delivery of One Franklin Park in the Cool Springs submarket was a key indicator of how hot the Nashville market truly is. Two years after starting out as a 267,000-square-foot spec building, the Class A property is now nearly fully leased.
The first quarter of 2015 is expected to pick up where 2014 left off, with the growing momentum of Nashville’s competitive office market. The market shows no signs of slowing down with noteworthy projects such as Gulch Crossing, 1201 Demonbreun, Capitol View and West End Summit all slated for delivery in the next three years.
“We are seeing the market respond in a positive way to larger users’ interest in these new developments,” said Lauren Riegle, Associate Broker of Office leasing in JLL’s Nashville office. “This is paving the way to build and maintain confidence in investing in the future of Nashville.”
Trends from the fourth quarter indicate tenants will want to strategically plan for growth and future office space needs. Despite the estimated 300,000 square feet of Class A Office space that will arrive in the coming year, this supply may not be substantial enough to meet the continuing demands of the market. Nashville remains in high demand for corporate expansion and relocation, and experienced an above-average rate of job growth in 2014 that was 1.6 times faster than the national average.