SOUTHEAST SNAPSHOT, JULY 2009

Nashville Industrial Market

By now, signs of the recession have crept into even the most stable commercial real estate sectors. In the Nashville industrial market, the downturn has caused rising vacancy rates. Brokers have seen low big-box activity during the first quarter, a trend that began in the waning months of 2008. Nashville tenants seem to be looking at space, but they aren’t making any moves.

“There has been tire kicking — indication that interest exists for large blocks of space — but the economic upheaval has kept big box activity flat,” says David McGahren of Colliers Turley Martin Tucker in Brentwood, Tennessee. “Investment activity is hindered because of the lack of available debt and the resulting disconnect between seller and buyer expectations.”

Two major projects have infused a bit of color into the bleak industrial landscape surrounding Nashville. Opus has just broken ground on a 700,000-square-foot build-to-suit project at the intersection of Couchville Pike and State Highway 840 for Nissan. Down the road, if Nissan needs to expand, the facility can encompass a total of 1.2 million square feet. Sacramento, California-based Panattoni Development also has completed the first phase of the 2.3 million-square-foot Beckwith Farms industrial complex. In all, the property will contain eight buildings.

Activity elsewhere has been minimal. Sales are struggling, and leases are generally in the 50,000- to 100,000- square-foot range. “Nashville’s investment sale activity has mirrored the national market,” he says. “There remains a dramatic gap between buyer and seller pricing expectations for institutional product.”

To get out of this real estate slump, consumers must feel like they can spend money, McGahren says. If all the uncertainty in the stock market and the fear of mounting job losses lessens, the Nashville industrial market and markets across the Southeast may awake from their recessionary slumber. “We need to see a stabilization in employment and a return of overall consumer confidence. Spending at both the business and household levels has been subdued, and this has obviously had a significant impact on manufacturing and distribution inventory levels,” he says.  

When the market returns to some semblance of normalcy, McGahren has no doubts that activity will return to Nashville’s industrial spaces. “Nashville has been and will continue to be a highly desirable distribution location. The interstate system as well as a highly qualified work force and outstanding quality of life will always be effective in attracting new companies,” he says. “Increased activity in the Nashville market will happen as we see improvement in the overall national picture.”

— Jon Ross

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