Music City soars to third in the world….
3rd on the charts: Nashville’s rent growth is ranked third in the world
According to The Prologis Logistics Rent Index released in March 2016, Nashville’s rent growth is the third highest in the world. Year over year rent growth between Q2 2015 and Q2 2016 was 25.0 percent. Nashville’s powerful rent growth has continued at full force this year. Overall industrial rent sits at $4.38, up 4.6 percent from last quarter. Rents will continue to increase as vacancy continues to decrease. Vacancy dropped to 5.0 percent for the overall market, which is a 150 basis point decrease from one year ago. Warehouse and distribution space is even more competitive, ending the quarter with 4.6 percent vacancy.
Supply gap: 20,000-50,000 square foot users compete for very few options
Tenants are finding it increasingly difficult to find contiguous blocks of space that meet their needs and may continue to have difficulty locating space if preleasing activity continues to remain strong. In particular, space in the 20,000-50,000 square foot range is demanding premium rates because of their limited availability. In this size range, there are only 27 Class A and B warehouse and distribution options in the Tier 1 submarkets (IBD, North, East, Southeast, Southwest, West and Wilson County). 1.4 million square feet, 82.6 percent of which was preleased, have been delivered to the market year-to-date; and new construction is on track to grow the market’s total inventory by 2.8 percent.
Remarkable sale prices highlight the market’s desirability
Nashville’s sales prices continue to trend upward. Nashville’s second largest flex park, Airpark Business Center (14 buildings and approximately 1.2 million square feet), sold for $87.0 million in May of 2016 compared to its previous sale in August of 2013 for $63.2 million. The price for this park increased by 37.7 percent in less than 3 years. This increase in building value is a function of increased rents and compressed cap rates.
For full report, click here!