Nashville’s multifamily market is expanding, fueled by last year’s historically high levels of completions, Yardi Matrix shows in a recent report. The huge amount of new supply is pushing down occupancy, while limiting rent gains to 0.9 percent as of August, lagging behind the 3.1 percent national average. However, these limitations do not apply to the condo sector. Meg Epstein, founder of Nashville-based CA South Development, believes the condo market in the city is full of opportunity.
“The condo market is in a state of undersupply combined with tremendous demand. The quantity of units delivered to the market in 2017 was minuscule,” Epstein told Multi-Housing News. In their 2018 residential report, Nashville Downtown Partnership—a private sector nonprofit corporation—found that there were roughly 7,600 residential units downtown, out of which only 32 percent were condos. Epstein suggests that banks could be among the factors that are causing the supply imbalance in the city because financial institutions tend to favor apartment projects.
Appetite for luxury
Large white-collar employers such as Bridgestone Americas—which operates from its recently completed 30-story headquarters in downtown Nashville, where more than 1,500 people work—are enticing developers to fill the gap in the luxury condos sector. “People moving from Chicago, San Francisco, Los Angeles, New York and other coastal cities, who are used to high-rise living, want an urban living experience that isn’t renting apartments,” Epstein said.
Investors are drawn to Music City’s condo market due to the lack of competition and new projects. Epstein notes that “much of what is being built is ultra-luxury and affordable only to the super rich. Rumors are that the 505 building is tearing out smaller units at 500-800 square feet and making 2,500-square-foot units that will sell for $2.2 to $2.5 million, showing that the ultra-luxury is where the demand is heading.” The 45-story skyscraper at Church Street and Fifth Avenue in downtown Nashville, known as 505, is an upscale building that encompasses apartments, condominiums and penthouses.
Filling the gap
CA South Development currently focuses on the Nashville condo market, where the company is serving the pent-up demand. “We have several projects that we’re doing in the hot Eighth Avenue South corridor. One close to The Gulch and two others near Wedgewood Houston, still on Eighth Avenue. We love the corridor just to the south of town where freeway access is excellent, traffic is less and there’s more and more good restaurants and services opening,” Epstein revealed.
One of the projects that CA South Development is involved in is the seven-story River Tower. The company is building 35 luxury, waterfront condos between the historic neighborhood of Germantown and downtown. In the same area, the firm is also working on a mixed-use building that is set to include 77 condos and retail space.
Nashville’s appetite for condos is also reflected in The Gulch, an upscale neighborhood that provides easy access to interstates 40 and 65. Twelve | Twelve was the first condo building to open following the last economic downturn. The high-rise was initially envisioned as an apartment community, but developer Ray Hensler switched to condos. “Recent comps for the 1212 12th Ave. project are between $800 and $1,000, far in excess of the cost of construction,” said Epstein.
Image courtesy of CA South Development