2 min read October 2021 — Vincent Lefler, executive managing director at Newmark, spoke to Invest: about the growth in Nashville’s real estate sector, touching on how the sector has fared pre-pandemic, during the pandemic and now. Nashville, he said, is a midrange market seeing phenomenal growth, from its dense Downtown to the exurbs.
What makes Nashville attractive from a multifamily perspective?
While there are many reasons I could talk about, it really boils down to two things: A vibrant, growing economy and an attractive, high quality of life. Nashville has a balanced economy that has strong cyclical and non-cyclical drivers. With Amazon, Oracle and a host of other recent announcements, our growing tech sector will create even more momentum. While jobs are crucial, you also have to be a place that people want to call home. Nashville is also known for its incredible lifestyle and its friendly, welcoming people. It combines big city attractions and amenities with the charm and community of a small city. With so much to offer, it’s no wonder our city continues to see job and population growth. As the city grows, the need for housing options grows with it.
What does multifamily look like today in terms of new construction?
As you’d expect with heightened demand, the construction pipeline is robust. We have approximately 17,000 units under construction across the MSA. While that sounds like a lot, Nashville has been an underserved apartment market for a while. In 2017-2019 the city had another significant up cycle with about 15,000 units under construction; many experts predicted long-term softness and stagnant rents. Nashville stabilized significantly faster than expected, hitting our tipping point in mid-2019. By the end of that year, Nashville was identified as one of the fastest rent growth markets in the country. I predict a similar outcome this time. This time the supply is more spread out across the market instead of concentrated. Even far suburban areas – exurbs – are experiencing growth so they also need housing. Those new properties are leasing up as fast as they can deliver units. The growth of the exurbs is new to Music City. Regarding the in-fill supply, the surge of in-migration from the Northeast and West Coast regions are filling up Downtown/West End apartments as we speak. I recently worked on a property that was in lease up and according to staff, 50-60% of new residents were new to the city. Also, all the huge job announcements, which have yet to really impact the downtown, will continue to drive absorption as new hires move in.
How does access to capital compare to historical levels?
It’s readily available. What’s interesting is that during the pandemic, Newmark hosted over 100 calls with many of our top clients. During the first few months of the pandemic, everyone was trying to understand what was going to happen to commercial real estate – it wasn’t just multifamily, but included all of the real estate food groups: office, retail, hospitality, etc. We would ask our clients what they saw happening and we would share information. It was quickly apparent to both institutional and private owners that industrial and multifamily properties would recover faster or even thrive. Owners began to focus on smaller, dynamic markets like Nashville, Austin, Raleigh, Phoenix and Tampa. These secondary, high-growth markets present more opportunity than larger, gateway markets. Thus, Nashville is a highly sought-after investment market. Every major investment group is looking to buy or build in Nashville right now.
What challenges does Nashville face right now?
I would say we’re facing the classic challenges of any growth city: maintaining the character and identity that makes a great city while adapting to and including new ideas and people. It’s a balancing act we all have to work together on while being patient as we find solutions. A few specifics that have to remain in focus are: providing adequate infrastructure and social services. Amazon is a great example of good, thoughtful growth and has done a fantastic job of being good, new Nashville neighbors. They worked with the city regarding the potential impact of traffic on urban streets. They were concerned about a potential negative impact so they made efforts with their employees to encourage the use of alternative forms of transportation: walking, biking, “scootering” to work. A phenomenal effort that will have a positive payoff.
What is your outlook for the next three years for the multifamily sector?
I don’t want to jinx it, but there seems to be blue skies and rainbows here. From a multifamily perspective, the future looks really strong. Nashville’s economy is growing, people are moving in, multifamily fundamentals are off-the-charts good and investors want to be here. Looks good to me!
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