1400 18th Ave

Market Overview

Nashville MSA Office Market Overview For most office markets around the country, commercial real estate leasing has been in a holding pattern that is beginning to recover. The timing and strength of the recovery is dependent on a number of factors: consumer confidence, increased employment, capital constraints, and commercial and consumer expenditures. Nashville’s office market only saw a small bump in the road from 2008-2009, and has been moving forward ever since. The diversification of industries has provided insulation to adverse changes in the economy, and has been the key to strong leasing and absorption. Direct vacancy for the office market is 8.7%, down from 14.4% in 2009. After small negative net absorption in 2009, absorption has been positive since. Both 2010 and 2011 had absorption figures well above 500,000 SF, and 2012 reported a positive number just over 1.0 MSF.

First quarter 2013 posted positive 146,394 SF – a relatively flat number considering the recent historical absorption figures. The reason for this low figure is simply that there is very little space to absorb and little speculative construction under way. Large users such as Tractor Supply, Amsurg and LifePoint Hospitals are building new headquarters within the MSA and will add to the vacancy rate when they move. Landlords are diligently pre-marketing their existing space with hopes of leasing the space before it hits the vacancy and absorption figures in early 2014. Interest in Nashville remains high, and new relocations are always a possibility. With strong tenant demand and lack of quality “large blocks” of space, the pressure has shifted to the developers to add speculative space, with an emphasis on LEED certification and higher end Class A product both inside the city and in the suburbs.

Construction, Absorption & Vacancy t i , rption, and Vacancy

1,500,000

20.0%

18.0%

1,250,000

16.0%

1,000,000

14.0%

750,000

12.0%

500,000

10.0%

250,000

8.0%

0

6.0%

-250,000

4.0%

Construction

Absorption

Vacancy

16 | Cassidy Turley