Commercial real estate in Tennessee’s two major cities, Nashville and Memphis, is witnessing strong demand from tenants and solid interest from investors, according to an analysis by the National Real Estate Investor (NREI).
With a strong healthcare sector and being home to the North American headquarters of Nissan and Bridgestone, Nashville’s economy is booming with an unemployment rate of 3.9%. Consequently, the city’s office vacancy rate is 4.7%, among the lowest in the nation. J.T. Martin from CBRE’s Nashville office explains that the city’s wages are 10-12% above the national average, while the cost of living is 10-12% below the national average, resulting in a booming downtown area. Developers have taken notice. While projects used to be limited to local developers, national firms are now bidding, says JLL’s Tom Hooper. There are $3 billion worth of projects in the pipeline and 3.8 million square feet of office space under construction, of which 72% is already pre-leased, adds Hooper.
Meanwhile, Memphis, already home to FedEx, is enhancing its status as a global logistics hub with a sizable presence from UPS and the US Postal Service as well. About 6 million square feet is expected to be absorbed this year, on top of 8 million square feet absorbed in 2015, said Tony Argiro, with CBRE’s Memphis office. Argiro is also seeing e-commerce companies drive demand for more space and signing longer term leases. With a vacancy rate of 3.3%, Memphis is already the second largest commercial airline hub in the world.