"Nashville continues to grow and is rapidly becoming the preferred market for e-commerce distribution, attracting both occupiers and national investors. With burgeoning market dynamics, Nashville is pulling out of the pandemic faster than many other markets. As a prime logistics location within a two-day drive of 72% of the U.S. population, Nashville remains a top industrial hub."
With a population of more than 2.3 million that is expected to grow by 9.1% over the next five years, Nashville is an ideal final-mile market for consumer-goods manufacturers and retailers. Nearly 29 million people live within 250 miles of downtown Nashville, with an expected growth rate of 4.0% over five years.
Figure 1: Nashville Population Analysis
Distance from Downtown Nashville (miles)
Source: CBRE Location Intelligence.
Nashville’s local warehouse labor force of 43,750 is expected to grow by 19% over the next 10 years, according to CBRE Labor Analytics. The average salary for non-supervisory warehouse workers is $13.67 per hour, 3.3% lower than the national average.
Figure 2: Nashville Warehouse & Storage Labor Fundamentals
Source: CBRE Labor Analytics.
Over the past five years, there have been 120 economic incentive deals totaling more than $237 million at an average of $8,578 per new job in the Nashville metropolitan area.
According to CBRE’s Location Incentives Group, among the top incentive programs available in metro Nashville is the FastTrack Program, administered by the Tennessee Department of Economic and Community Development, which has three discretionary grants for the following purposes:
- Train net new full-time employees.
- Improve public infrastructure.
- Reimburse businesses for project-related expenditures, such as the relocation of equipment, building repairs/improvements and temporary office space related to an expansion or relocation.
To qualify for any of the above FastTrack Program grants, businesses must make a material capital investment and create net new full-time jobs.
Another program available in metro Nashville is the Job Tax Credit, which provides a corporate income tax credit of $4,500 per job to businesses that create at least 25 net new jobs within a three-year period and make a capital investment of at least $500,000. An expanded job tax credit is also awarded to qualifying businesses that locate in economically distressed communities for an additional $4,500 per job annually for between three and five years.
Figure 3: Top Incentive Programs
Nashville’s central location puts it within two-day ground delivery of 72% of the U.S. population. It is one of six U.S. cities with three major intersecting interstate highways, creating competitive and affordable transportation costs that attract top logistics and distribution firms from around the world. With a $1.4 billion expansion project underway, Nashville International Airport continues to grow its cargo-handling capabilities and has six air carriers, including FedEx, servicing the market.
SUPPLY & DEMAND
Nashville’s industrial market is undergoing rapid growth, with nearly 5.5 million sq. ft. of net absorption last year making it the 16th biggest growth market in the country (net absorption/existing inventory). Demand remained strong in Q1 2021, with another 1.3 million sq. ft. of net absorption.
The market’s overall industrial vacancy rate fell by 20 basis points (bps) to 4.4% quarter-over-quarter in Q1. The average asking rent increased by 7.5%—the ninth highest growth rate in the country—to a record $6.01 per sq. ft. NNN. Despite low availability, construction completions declined in Q1 to 849,140 sq. ft. However, 8.3 million sq. ft. of industrial space is currently under construction, with 42% of it preleased.
Robust preleasing will continue to limit available space options in the coming quarters, keeping the overall vacancy rate low and increasing the average asking rent.
Figure 4: Nashville Historical Data
Source: CBRE Research, Q1 2021.
Figure 5: Nashville Size Range Comparison
Source: CBRE Research, Q1 2021