What Makes Nashville a Top Real Estate Market?

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Home to five professional sports teams and known as Music City, USA, Nashville, Tennessee draws tourists by the droves to its many attractions.

But you’d be mistaken to think people only come and go. As Tennessee’s capital and most populous city, Nashville appeals to people at all different stages of life.

For college students, Nashville is known as the “Athens of the South” for its 24 post-secondary education institutions. For job seekers, it’s home to companies like Nissan North America, which employs thousands.

Nashville ranks all the way up at number 3 in Overall Real Estate Prospects for US Markets to Watch and number 4 for Homebuilding Prospects in the recent Price Waterhouse Cooper (PwC) and the Urban Lands Institute (ULI) Emerging Trends in Real Estate 2020 report.

In this article we’ll take a look at the diverse economy, soaring population growth, and high rental values that make Nashville a top market for real estate investment.

 

Diverse economy

Nashville has turned its struggling economic fortunes around, and its sturdy, diverse economy is the spark behind its rise. In Yardi Matrix’s Nashville Plays It Forte Multifamily Report Summer 2019, they note a focused strategy of investing in tourism and corporate relocations, boosted by a low tax rate, behind the surge.

Workers are finding ample employment opportunities in the area. Yardi reports, “Job growth is robust, with employment recording a 2.9% year-over-year uptick as of May, well above the 1.6% U.S. rate. The metro gained 23,200 jobs.”

And few workers are being left out. Their report adds that unemployment dropped to 2.1% as of April, which is far beneath the 3.7% U.S. average rate.

Along with jobs in the music industry, tourism, banking, and healthcare supporting Nashville’s economy, Yardi calls attention to growth in the professional and business services sector.

Highlights include Amazon’s $230 million investment, which will bring 5,000 high-paying jobs, as well as AllianceBernstein, relocating from Manhattan, which has announced 1,050 positions. And SmileDirectClub is set to expand its operations in Nashville, generating another 2,010 positions.

Nashville’s strong economy is generating demand for apartment rentals and office spaces, and its diversity lowers the risk of significant job losses or relocations in one sector crippling demand citywide.

 

Soaring population growth

Yardi notes that Nashville added almost 400,000 people in the past decade. Its economic opportunities are drawing jobseekers to the area, and its reputation for a good quality of life and affordability make living in the city hard to top. With all of its appeal, Nashville ranked #15 in the U.S. News & World Report’s The 25 Best Places to Live in the U.S. in 2019.

But despite people moving to the city for some time, what gets investors excited is that the growth is still explosive. Yardi cites, “„„The metro gained 34,190 residents in 2017 for a 1.8% Expansion.” They go on to break this down as “nearly 100 people a day and more than double the U.S. rate.”

 

High rental values

Nashville’s astonishing population growth is increasing housing demand, pushing rents higher. And as higher rents mean more potential for positive cash flowing properties, the figures reported in Nashville are grabbing our attention.

Yardi says, “Music City was one of the top 10 major U.S. metros for rent growth in the 12 months ending in June, with the average rate rising 4.1% year-over-year.”

Yet while housing development in Nashville is on the rise, which could ease demand and lower the rates, it doesn’t look like the high rents are going anywhere soon.

Yardi points out, “And despite last year’s development cycle peak, occupancy in stabilized properties dropped just 10 basis points over 12 months, to 95.0% as of May.” They go on to explain, “Although development remains elevated, the metro’s fast-paced economic and demographic expansion is slated to continue boosting demand.”

 

Something for everyone, including real estate investors

From tourist attractions to access to quality higher education, it feels as though everything is thriving in Nashville. Students, retirees, music lovers, young families — there’s something for each in the area.

With established companies like Nissan North America and big spenders like Amazon expanding operations, the economy is thriving, the population is growing, and housing development is unlikely to knock down rental values anytime soon.

With multi-family housing and commercial real estate in severe demand, there’s opportunity in Nashville for investors too.

At Birchstone Investments, we review investment opportunities in the Nashville multifamily real estate market. If you’re interested in learning more about commercial real estate investment opportunities in Tennessee or another area of the Southeastern United States, join the Birchstone investor community today.

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Jerry Hollifield

Jerry Hollifield

Jerry is the Managing Principal & Chief Investment Officer at Birchstone Investments, LLC. With a business career that spans more than 30 years, he has been involved in the acquisition, development, financing and management of over $400 million in real estate. In addition, he has been involved in more than 40 Merger and Acquisition transactions with total value exceeding $600 million.

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