According to Cushman & Wakefield, Nashville’s unemployment rate continued to decline in Q2 2022, posting at 2.6%, down 30 basis points (bps) from last quarter. The labor market remains tight compared to the U.S. average of 3.6%, unchanged since last quarter. Though the economy has bounced back in terms of job growth, the aftermath of the pandemic has triggered supply chain constraints and a staggering 9.1% inflation rate. Despite growing economic concerns, Nashville’s industrial market remained robust and strong with consistent demand and high positive absorption. DEMAND Nashville maintained tight market conditions with no signs of slowing down. Leasing activity posted at 2.2 million square feet (msf) for Q2 2022, bringing the year-to-date (YTD) activity to 4.5 msf. The top three deals of the quarter were in the East submarket, including Supply Chain Warehouse signing 471,851 sf at Nashville 840 Logistics Center, Dawson Logistics inking 445,942 sf at Park 840 West, and Hollister’s renewal of 240,000 sf at Beckwith Farms. Since the majority of leasing activity is concentrated in newly constructed buildings, the East and Southeast submarkets have a strategic advantage to attract tenants seeking new Bulk A product along the I-40, I-24, and I-840 corridors. The largest sublease of the quarter occurred in the Industrial CBD submarket with CWC Logistics signing 180,000 sf at 485 Craighead St. Leasing demand continues to be driven primarily by 3PL and e-commerce companies taking advantage of Nashville’s central location and development opportunities along I-40 and I-65. PRICING Overall asking rents posted at $6.79 per square foot (psf) for Q2 2022, up 36.0% year-over-year (YOY). New construction asking rates are landing between $11.00-$12.00 psf for leases under 100,000 sf. This is a result of both a market with continued constrained supply and the amortization of higher tenant improvement expenses built into the tenant’s rate. It is becoming increasingly difficult to forecast accurate pricing to account for TI needs, which will impact preleasing for new construction product.
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