At the mid-year point, 2.6 million square feet of industrial space in Nashville had been completed. This keeps the local market ahead of last year' pace, in which 4.5 million square feet of new industrial space was completed.

There is approximately 1.3 million square feet of industrial development currently under construction, 770,000 square feet of which are bulk buildings. These buildings should be completed by the fourth quarter. "Eighty-three percent of all new construction has been bulk distribution buildings," says Ben Blakeley, research director for Colliers Turley Martin Tucker. "We should see continued bulk development in the local industrial market. Construction totals should approach last years totals."

Within the last year, Stiles Corp. and Panattoni Development have entered the market and built a number of buildings. Panattoni Development' SouthPark development off of Almaville Road in Smyrna continues to see a lot of activity, especially for larger users in the market. Nissan, Graybar Electric and Logisco have leased a combined 1.5 million square feet in the new park. Panattoni has built three 500,000-square-foot cross-docked bulk buildings and is currently building a fourth that will total 376,000 square feet. These companies came to the area mostly to consolidate regional distribution operations. Panattoni purchased an additional 38 acres adjacent to the park for future construction. SouthPark will eventually total more than 2 million square feet.

The majority of industrial development is taking place in the Southeast market area, Blakeley says. By year-end 1999, the Southeast overtook the industrial central business district (ICBD) as the largest market area in terms of square-footage. Since 1998 the Southeast market area has added over 5.7 million square feet to its inventory. Outside the ICBD, the Southeast market has the largest critical mass of industrial space in the Nashville MSA. The majority of development takes place in the Southeast market due to the availability of industrially-zoned land, easy accessibility to the interstates and the presence of a number of national manufacturers such as Whirlpool, Nissan, Ingram and Hewlett-Packard. Hewlett Packard' campus at Mid-South Logistec Center will eventually total 1.2 million square feet. This area is also within close proximity to labor supply.

With Dell and Hewlett-Packard (HP) having major manufacturing operations in the Nashville area, there has been a push to attract some high-tech users and other computer-related suppliers associated with Dell and HP. The major type of tenant the local market is trying to attract (and has succeeded) to the area are large regional distribution operations that would be drawn to the area by the three major interstate systems and the area' quality of life. Nashville is within a day' drive of 60 percent of the United State' population.

Rental rates for bulk product range from $3.10 to $3.30 per square foot. Manufacturing facilities range from $2.75 to $3.05 per square foot. Business centers range from $4.50 to $4.75 for warehouse and $10 to $11 for office.

The overall vacancy rate inched up slightly in the second quarter from 4.3 percent posted in the first quarter to the current rate of 4.7 percent. "With a fair amount of construction still underway, we should expect to see vacancy rates rise somewhat in the forseeable future, though not dramatically," notes Blakely. "However, strong leasing activity in the bulk sector helped push down vacancy rates in the second quarter for bulk buildings." The rate dropped from 7.4 percent posted in the first quarter of 2001 to the current rate of 6.9 percent.

Blakeley says the area to keep an eye on is the Southeast market, which will continue to grow at a strong rate as well as be the center of most leasing and construction activity. Also, the East market area will be a hot area now that speculative development has seen some success. Dell' presence in Eastgate Business Park has sparked considerable interest and development in the area. There are only 50 acres left that are available for purchase in the entire park. First Industrial has built and leased a 403,750-square-foot building down the street from Dell, and Stiles recently leased its 235,000 square-foot building to Menlo Logistics. First Industrial is currently underway with another 403,750-square-foot cross-docked bulk distribution building.

Overall year-to-date net absorption for all product types is just over 800,000 square feet. However, the bulk market has seen occupancy levels increase by 1.7 million square feet . Large vacancies in the warehouse and manufacturing sectors have offset much of the growth in the bulk sector.

Ben Blakeley is research director for Colliers Turley Martin Tucker.


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