While major industrial and logistics markets capture most of the headlines, industrial occupiers and investors know that dozens of secondary markets are essential to supply chains in the U.S.
Of the 81 industrial markets Cushman & Wakefield tracks, the firm selected five emerging industrial real estate markets outside of primary markets that are markets to watch are based on key metrics from 2019 through 2021, including net absorption, new tenant demand, vacancy, rent growth, construction pipeline and deliveries.
Included in the five is Nashville. A central location in the Southeast U.S. — intersected by three major interstates — puts 12 million consumers within a two-and-a-half-hour drive of Music City. That geographical advantage bodes well for logistics and e-commerce users who need easy customer access.
Additionally, some major corporate announcements and relocations to Nashville, such as Alliance Bernstein, Amazon and Oracle, have had a trickle-down effect on the industrial market. More workers have migrated to the area, driving more residential development, which in turn has spurred demand for construction materials and supplies, along with more consumer products. Of course, these goods flow through logistics real estate, which has helped drive demand for warehouse space to new heights.
Nashville’s industrial leasing and absorption activity has been dominated by e-commerce and third-party logistics occupiers. From 2019 to 2021, more than 19.0 million square feet (msf) of industrial product was absorbed, 7.0 msf of which occurred in 2021 alone. Since 2020, Amazon itself accounted for 52% of total absorption as the e-commerce giant expanded rapidly within the market.
Broader tenant demand continued to yield robust totals with 9.5 msf leased in 2021, the majority of which was concentrated in Eastern and Southeastern submarkets. Significant deals leading that activity were inked by Wal-Mart, Chewy Inc., FedEx and Southerland Sleep. Elevated demand coupled with tightening conditions spurred developers to build almost 20 msf of new industrial product from 2019-2021, responding to the need for additional Class A warehouse space.
As of Q1 2022, Nashville has a record 14 msf of product under development, 73.6% of which should deliver by year-end 2022. Of these expected deliveries, 8.6 msf is being developed on a speculative basis. Finally, with historically tight vacancy (2.9% at Q1 2022), asking rents swelled by 28% from Q1 2021 to Q1 2022 and should trend higher as strong demand and market fundamentals persist.
For more, check out our “Five Industrial Markets to Watch.”