Construction Surge Stalls Rent Growth in Nashville

The metro’s multifamily market is expanding, bolstered by last year's historically high levels of completions, which are pushing down occupancy, while limiting rent gains.
Nashville rent evolution, click to enlarge
Nashville rent evolution, click to enlarge

Solid in-migration, sustained job growth and business expansions have contributed to Nashville’s development. The rental market is growing, posting historically high levels of completions last year, which could result in limited rent growth and a drop in occupancy, already down 160 basis points year-over-year to 94.3 percent. Rents rose 0.8 percent to $1,196 through April, trailing the 2.4 percent national average.

Music City’s economy, mostly sustained by the entertainment industry, is branching out: The professional and business services sector expanded by 7,300 jobs in the 12 months ending in February, as companies relocate to Nashville, encouraged by its favorable business environment, which now also includes Google Fiber. Asurion and ServiceSource Corp. are adding 850 jobs combined, while health-care giant Philips plans to build a health IT center and create 800 positions over the next few years.

Investor demand has softened: By April, some $144 million in multifamily assets had changed hands, almost all of them in the RBN segment, which cut the per-unit price down to $103,354. About 2,600 units were delivered by April, of the 5,600 that are expected to be delivered this year. Some pockets of oversupply have surfaced, which combined with a supply imbalance will likely limit rent growth. We expect rents to rise 2.1 percent in 2018.

Read the full Yardi Matrix report.