Yardi Matrix: Music City’s Diverse Economy
The Nashville/Knoxville metro is becoming one of the nation’s most attractive secondary markets for developers and investors, even if rent growth is in the middle of the national pack.
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Driven by a diversified economy led by its iconic entertainment industry and a first-rate healthcare sector, the Nashville/Knoxville metro is becoming one of the nation’s most attractive secondary markets for developers and investors, even if rent growth is in the middle of the pack nationally. Nashville’s population growth, healthy employment sector and cost-friendly business climate are driving corporate expansions and relocations in industries such as auto manufacturing.
An economic pillar for the market, the entertainment industry contributes nearly $10 billion a year to the local economy, while the healthcare sector’s economic impact has reached $38.8 billion. The metro is also developing into an up-and-coming locale for entrepreneurial ventures: Investors poured more than $280 million into startup businesses last year, with a total of $1 billion statewide since 2012.
The outlook for multifamily fundamentals is favorable, as strong demand will help fill the 3,300 units completed in 2015, though the 13,400 units currently under construction will put a damper on rent increases once they hit the market. The metro’s growing prominence as a top Southern secondary market is attracting investors, helping transaction volume reach $1.4 billion in 2015, the highest in the current cycle. In-migration and healthy employment will continue to drive rent gains, but heavy new supply and affordability should moderate rent growth from the 7 percent range in 2015 to 4.2 percent in 2016.
