How has the Nashville market faired in light of COVID-19? The Nashville market, like most, felt the adverse effects of COVID-19. The area most affected was hospitality, as tourism is an integral part of Nashville’s economy. The office sector was also drastically impacted by COVID-19, along with Nashville’s retail, particularly for privately owned businesses that were not deemed essential by the federal government. The sectors that have benefited from increased demand are industrial and single tenant net lease with investment-grade credit. There is still an incredible amount of development in the area, and population growth will continue to drive development moving forward.
What sectors saw drastic changes in pricing during the past year? In Nashville, net lease retail with investment-grade credit tenants has seen a significant price jump. Interest rates are still historically low, and the demand for high credit tenants has jumped tremendously. With low interest rates, investors can justify reduced cap rates. For example, tenant types such as dollar stores, drugstores, and corporately guaranteed drive-thru’s have experienced considerate cap rate compression.
What can we expect from the Nashville market in 2021? In 2021, we can expect the office, hospitality, and retail sectors to continue making strides towards recovery as restrictions loosen and the vaccine reaches widespread distribution. Nashville is one of the most prominent healthcare hubs nationwide, and it is anticipated that both demand and development will increase in the medical real estate space.
What is attracting investors to the Nashville real estate market? Nashville is ranked as one of the most sought-after markets in the country. We have seen increased demand for properties in tax-free states throughout the past year. There is an extraordinary amount of capital coming into Nashville, particularly from the coastal cities. That notion, compounded with the population growth and countless companies relocating to the market, will result in continued demand for Nashville assets.
Any major announcements that have boosted Nashville’s recovery? It seems there is an announcement for a new major corporation coming to Nashville every other week. Of all the headlines, Oracle’s proposed plans for its new $1.2 billion urban campus stands out. The 60-acre project would bring 1.2 million square feet of office space and retail to Nashville. The project is anticipated to employ over 8,500 people, with an average salary of over $110,000.
What product types see the most demand? Aside from multifamily, the flex/industrial market is seeing the most demand at the moment. We have seen several long-term retail investors shift to flex and industrial facility investments. The concept is still the same, but the product is growing much more. Furthermore, companies are now repurposing traditional warehouse spaces to creative offices in downtown neighborhoods.
Any significant trends in the Nashville market? We are seeing more national retailers looking to expand in the middle Tennessee market. Specifically, developers are actively targeting shopping center locations with pads sites to grocery or strong big-box (Lowes, Home Depot, etc.) anchored tenants. These national tenants are willing to pay a higher price per square foot on land compared to many local tenants.