Music City’s Multifamily Build-Up
- Oct 12, 2018
Following last year’s historic number of deliveries across the metro, Nashville’s rent growth has begun to slow down. At the same time, as the city’s major employers continue to generate new jobs, population growth is soaring—by one estimate, between 75 and 100 people are moving to the area each day.
Southeast Venture has been doing business in Nashville since its inception, in 1981. Offering a mix of brokerage, development and design services, the firm has been involved in many aspects of the city’s booming real estate economy.
Wood Caldwell, principal at Southeast Venture, spoke with Multi-Housing News about Nashville’s multifamily pipeline and investment opportunities. Caldwell joined the firm in 1985 and possesses a total of nearly 40 years of site engineering and real estate development experience.
Given the unprecedented number of multifamily units in Nashville’s development pipeline, what does it take for a project to stand out?
Caldwell: Location, location, location. The key is not to go where the competition is. There wasn’t much going on in areas like East Nashville, The Nations and MetroCenter before we started developing there. You have to watch the trends for a while and see where the market is going.
How has the market’s rent growth deceleration affected Southeast Venture’s business strategy?
Caldwell: It has slowed, but it’s still high—it hasn’t affected us yet. In 2018, the number of units that came online was unprecedented, so you’re seeing some projects giving one to two months of free rent to attract tenants, but we expect demand to catch up to supply next year.
Tell me about a recent development you were involved in. In what ways does it reflect the current housing trends in Nashville?
Caldwell: Silo Bend is the biggest example (of a recent development). In total, 105 condo units are going in there, and 65 have already been sold before they even dug the foundation. We’ve found that if you hit the $250,000 to $300,000 price point, or $175 to $200 per square foot, the units go quickly.
How are the needs of today’s renter different than those of a decade ago?
Caldwell: They want more amenities. They’re not looking for the largest unit, but the ones with nice amenities. They’re not doing much besides sleeping there, anyway, because they’re going out and spending their free time in communal and public spaces with friends.
What can an owner of an existing property do to stay competitive with the flood of new communities?
Caldwell: They can keep rents lower than what the newer properties are offering, based on the market price, and they’ll keep the units full. If they go for a buyout deal, though, the rents will go up again and people will go for the newer places at the same price.
What insights can you provide about the main opportunities and challenges in Nashville’s multifamily market right now?
Caldwell: You have to go where the markets are trending. Job growth is still booming, so plenty of young people are still coming to town and looking to rent. The challenge is keeping up with that demand, while keeping housing affordable. That’s not just a developer’s problem, but (a problem for) the whole city of Nashville.
Image courtesy of Southeast Venture