Nashville, TN Retail Market Report
Market Overview
Over the past few years, accelerated growth in Nashville’s economy and population has significantly boosted the retail market. The market is further fueled by a thriving tourism industry, attracting visitors nationwide. Leasing activity has remained stable over the past five years, leading to a consistent positive net absorption. Strong population growth, a resilient economy, and a notably low vacancy rate have provided property owners with the opportunity to raise rents rapidly. In fact, retail rents in the area have increased at one of the fastest rates in the country over the past 12 months. However, from an investment perspective, there has been a decline in investment activity starting in H2 2022, and this trend persisted throughout H1 2023. As interest rates have increased, the pricing disparity between buyers and sellers has become more pronounced.
Highlights
- Nashville’s economy is expanding, and preliminary figures from Q2 2023 show that the metro’s overall nonfarm payroll employment figure was more than 96,000 jobs higher than it was in February 2020.
- The construction pipeline accounts for roughly 1.1% of the metro’s inventory, indicating that supply-side pressure should be minimal in the near future.
- Retailers are drawn to Nashville because of years of above-average household and income growth.
Rents | Vacancy | Construction
Over the last two years, Nashville’s retail sector has experienced significant growth, overcoming the challenges caused by COVID-19. As a result, the city’s vacancy rate stands at 3.4%, nearly two percentage points lower than its rate at the end of 2020 and close to the 15-year low recorded in 2018. Over the last 12 months, there has been a significant rise in retail rents in the market. Nashville’s enduring demographic growth and resilient economy have played a crucial role in mitigating certain challenges traditional retailers face, resulting in a remarkable year-over-year rent growth rate of 6.4%, surpassing the national average benchmark of 3.5%.
Nashville has seen limited growth in retail development over the past few years, with a sluggish pace of groundbreaking in recent quarters. Consequently, only around 1.4 million square feet of retail space is currently being constructed throughout the metro, accounting for approximately 1.1% of the existing stock. Although this figure has slightly increased with the recent commencement of the 290,000 square feet Tanger Outlets project in Antioch, it still aligns with quarterly averages seen before the pandemic and falls short of the over two million square feet that were under construction in 2016.
Notably, the net absorption has consistently surpassed 200,000 square feet in each of the past seven quarters, a level that had not been achieved since 2015.
Sales
Nashville, By the Numbers in the Last 12 Months
- Sales Volume: $921M
- Vacancy Rate: 3.4%
- Deliveries in SF: 588K
- Net Absorption: 619K
- Rent Growth: 6.4%
Nashville has witnessed significant participation from retail investors recently; however, the constantly changing lending landscape has resulted in a decline in transactional activity. As the gap in pricing expectations between buyers and sellers widens, data and reports indicate a decrease in the number of deals completed.
