The Realiste Fund and the Demand for Industrial Land in Nashville

Increased demand for industrial land in Nashville has caused higher pricing per square foot and more competition among prospective buyers.

Nashville, TN, March 22, 2020 --( Growing Demand for Industrial Land in Nashville Leads to Seller's Market

Nashville's industrial land continued to be in high demand throughout 2019. At the end of the third quarter, Nashville had 1.5 million square feet of industrial land, representing a 93% increase over the end of the third quarter of 2018. This trend is expected to continue throughout 2020 due to Nashville's central location and easy access to transportation hubs by land and air.

Most of the industrial square footage of land is occupied by manufacturing and distribution centers. Those structures typically range in size from 50,000 to 200,000 square feet. The local market experienced 3.7 million square feet of absorption, bringing the area up to a total of 6 million square feet of absorption. A vast majority of this growth occurred on Nashville's east side as this is where most of the national manufacturing and distribution centers are situated within the metro area.

Currently, Nashville's industrial land has just a 2% vacancy rate. This is a historic low for the past 40 years. At of the end of 2019, the rental price per square foot of bulk industrial land was $4.71. This is down slightly from $4.80 per square foot at the end of calendar year 2018. The average rental price per square foot went up to $5.66 per square foot, but some of the pressure is being relieved thanks to the rapid growth and construction of new facilities.

Prices in the sub-50,000 square foot market are accelerating much faster, with triple net rents soaring from $7 per square foot in previous years to $9 to $14 per square foot for 5,000 to 20,000 SF small format space.

High demand for industrial land and low vacancy rates are expected to maintain these price levels or lead to reasonable increases within 2 to 5% for 2020. Even so, Nashville's current pricing per square foot is slightly lower than the South and about the same as the United States as a whole. The still relative affordability of the Nashville market should keep the area attractive to large businesses as well as medium-size businesses that are planning a growth period.

In the upcoming 12 months, industry analysts looking at the Nashville market for industrial land expect a flex space rental price increase of 2.0 to 3.9%. Decreasing vacancy rates, high absorption rates, high rental rates and medium to high new construction rates will continue to fuel the growth of the industrial land market in the area.

Combine the above with the destruction of 4,000,0000 square feet from the Nashville Tornado of 2020, and you've got a recipe for continued rising rental rates.

For more information about real estate trends and industrial growth in Nashville and the surrounding areas, contact the Realiste Fund, or email
Realiste Fund
Stephen Epstein