Nashville, the capital of Tennessee, is currently America’s tightest office market and rental rates are likely to rise further, driven by demand from the technology and healthcare sectors, according to JLL.
Based on JLL’s data, tenants are looking for a total of 2.4 million square feet of space. Meanwhile, 2.6 million square feet of new office space will be available by the fourth quarter of 2017. However, about 64.6 percent of this new office space is pre-leased.
“We’re still at a point in the cycle where Nashville rents have room to grow,” said JLL’s Director of Office Research Scott Homa. “It’s the tightest office market in the country in terms of vacancy, and supply-demand fundamentals suggest landlords can continue to control pricing.”
Rental rates in the area have risen by 9.3 percent quarter-over-quarter. Direct average asking rent this year has increased by 218 basis points, from $23.59 per square foot to $25.78.
Strong overall business growth has helped to boost office demand in the metropolitan area. Tennessee posted an 8.7 percent gain in the number of new business filings in the first quarter of this year, compared to the same period a year ago. The increase marks the 22nd consecutive quarter of growth, according to a report from the Secretary of State’s office. The state’s unemployment rate at 3.6 percent is below the nation’s average of 4.6 percent.
Nashville is among areas that have seen growth in the technology leasing market, according to JLL’s 2016 U.S. Technology Outlook report. Two sectors – the automobile and health care industries – have spurred the city’s tech growth. Across the U.S., the technology sector has captured the largest share of leasing volume in the first quarter of this year at 24.2 percent. The financial sector took the second-largest share at 14.2 percent.
Pictured: Korean Veterans Blvd Bridge in Nashville, Tennessee Nashville, the capital of Tennessee, is currently America’s tightest office market and rental
For more information on the Nashville market, please contact: Hensley Loeb, Research Analyst, TN Markets, Hensley.Loeb@am.jll.com