E-commerce and Automotive Drive Demand for Distribution Space in Nashville
Angeles, January 20, 2015—The four-year recovery of the U.S. industrial real
estate market is poised to continue in 2015, with demand again projected to
outpace supply, availability continuing to decline and rents rising, according
to CBRE Research’s 2015 U.S. Industrial
Nashville has felt the positive industrial
activity, as overall industrial vacancy dropped to 8.1 percent. The 2015
Tennessee Manufacturers Register reported that Tennessee added 4,473 industrial
jobs from September 2013 to September 2014.
E-commerce in Nashville is on the rise, with Under
Armour signing a new lease for its distribution center in Mt. Juliet, a Milan
Express new distribution center in Wilson County and the State of Tennessee’s
Baker West Distribution Center.
“There is still plenty of upside for the industrial
market, particularly for rental growth. Both cyclical demand drivers—GDP
growth, expanding manufacturing sector—and structural demand
drivers—e-commerce, supply chain evolution—will promote strong user demand
across geographies and product types,” said Scott Marshall, Executive Managing
Services, The Americas, CBRE.
Strong demand pushed net absorption to 224.1 million
sq. ft. in 2014—above its long-term average of 133.0 million sq. ft.—which, in
turn, will cause rents to rise by 4 to 5 percent over the course of 2015.
However, rents, while growing quickly, won’t return to their pre-recession
level until the latter part of 2016.
Industrial construction is no longer on pause in
Nashville. Two buildings are under construction and expected to be completed in
2015, including the construction of a FedEx facility. An additional 1 million
sq. ft. of construction is in the pipeline for Nashville.
Availability will continue to fall, but the rate of
decrease will slow as the construction of new space increases. New construction
is expected to rise to 141.8 million sq. ft. nationally in 2015—up from 115.2
million sq. ft. in 2014. This compares with a long-term average of 155.4
million sq. ft. By the end of 2015, supply and demand will be closer to
equilibrium and availability will begin to find its natural spot, settling near
Other highlights of the report, written by DavidEgan, Americas Head of Industrial Research, CBRE, include:
supply levels will rise, but rising construction costs could dampen
Construction was virtually non-existent in the aftermath of the recession
and has only gradually recovered in recent years. With modern distribution
space in short supply fueling development activity over the past 12 to 18
months, total new completions should finally reach long-term averages in
2015. However, rapidly rising construction costs threaten to temper
construction growth in the mid to long term.
automation (not reshoring) will spur more demand for manufacturing space
U.S. manufacturing is on the rise, with production outputs now at all-time
highs. However, these gains are due largely to increases in technology and
automation and are not a result of elevated employment or reshoring. The
increase in outputs has a simulative effect on industrial demand in key
manufacturing and supply chain markets.
industrial poised for strong growth in 2015
Light industrial facilities, properties smaller than 200,000 sq. ft., may
be best bet for growth in 2015. These facilities have historically
outperformed larger distribution centers in terms of rental growth, but
have lagged behind in the current cycle. With demand rising for facilities
in smaller infill locations in land- and supply-constrained urban areas,
light industrial fundamentals will see a boost in 2015.
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