Nashville, Tennessee’s commercial real estate market is constantly evolving and changing, reflecting the economic and social trends of each city and region. Every year, there are new and exciting developments, transactions, and opportunities in the commercial real estate sector, as well as challenges and risks.
How We Identified the Top Commercial Property Sales in Nashville
We used a multitude of data sources, including public records, news articles, and industry reports, to identify some of the top commercial property sales in Nashville, as well as the office vacancy rates and trends in the market. Our team analyzed this data to provide a comprehensive overview of the commercial real estate landscape in Nashville. Whether you are looking to buy, sell, lease, or invest in commercial real estate in Nashville, this post will provide you with valuable insights and information to help you make informed decisions.
A major factor impacting the commercial real estate market in Nashville and other cities are rising interest rates and economic uncertainty. Higher interest rates increase the cost of borrowing and financing for commercial real estate transactions, as well as reduce demand and affordability for buyers and investors. Economic uncertainty can also create volatility and risk in the market, as businesses and consumers may postpone or cancel their plans to lease, buy, or sell commercial properties. Commercial real estate stakeholders closely monitor interest rate and economic trends and adjust their strategies accordingly.
Here are a few of the most significant property deals of the year so far Nashville:
- The sale of The Gulch Union, a mixed-use development with 330,000 square feet of office space, 350 apartments, and 25,000 square feet of retail space, for $300 million to Clarion Partners.
- The sale of The Fifth + Broadway, a mixed-use development with 372,000 square feet of office space, 381 apartments, and 200,000 square feet of retail space, for $293 million to Invesco Real Estate.
- The sale of The Element Music Row, a 19-story apartment tower with 431 units and 6,500 square feet of retail space, for $144 million to TA Realty.
- The sale of The Capitol View, a mixed-use development with 378,000 square feet of office space, 378 apartments, and 130,000 square feet of retail space, for $140 million to Northwood Investors.
- The sale of The Nashville City Center, a 27-story office tower with 490,000 square feet of space in downtown Nashville, for $136 million to Starwood Capital Group.
The Latest on Nashville Office Vacancy Rates
One of the indicators that reflects the impact of interest rates and economic uncertainty on the commercial real estate market is the office vacancy rate. The office vacancy rate measures the percentage of office space that is unoccupied or available for lease or sale in a given market or submarket. A high office vacancy rate can signal a weak demand or oversupply of office space, while a low office vacancy rate can signal a strong demand or undersupply of office space.
Another factor that is currently impacting office vacancy rates and the commercial real estate market across the nation is the continuing impact of work-from-home. The COVID-19 pandemic has accelerated the adoption of remote and hybrid work models, which allow employees to work from home or other locations instead of commuting to a central office. This has reduced the need and demand for office space, as well as changed the preferences and expectations of tenants and landlords. Some of the trends that have emerged from the work-from-home phenomenon are the increased demand for flexible workspaces, suburban offices, and amenities that support health and wellness.
Using data from various sources such as Cushman Wakefield and Commercial Edge here are the office vacancy rates year over for Nashville starting in 2021:
- In 2021, the office vacancy rate in Nashville was 20.58%, significantly higher than the national average of 12.0%, as the city’s office market faced challenges from the pandemic and its aftermath. The vacancy rate increased by 430 basis points year over year, reflecting the negative net absorption of 2.3 million square feet.
- In 2022, the office vacancy rate in Nashville is projected to rise to 21.0% by the end of March, still higher than the national average of 16.7%, as the recovery of the office market is hampered by space givebacks and a weak capital markets environment. The vacancy rate is expected to increase by 40 basis points quarter over quarter, reflecting the negative net absorption of 400,000 square feet.
- In 2023, the office vacancy rate in Nashville is projected to increase further to 21.5% by the end of June, reaching a record high for the market, as the demand and occupancy of office space remain low despite the vaccination rollout and the reopening of the economy. The vacancy rate is expected to increase by 50 basis points quarter over quarter, reflecting the negative net absorption of 500,000 square feet.
Looking Ahead: Nashville Commercial Real Estate Outlook
The commercial real estate market in Nashville has experienced some notable property sales and transactions in 2023, as well as some challenges and opportunities in terms of office vacancy rates and trends. Looking ahead, the outlook for 2023 and beyond is cautiously optimistic as the market faces some uncertainties and risks, such as the potential oversupply of office space, the changing demand for flexible workspaces, and the competition from other cities and regions.