Future Cities
Emerging Industrial Markets: Nashville
April 1, 2024 5 Minute Read
Nashville is a key industrial market because most of the U.S. population is accessible by two-day ground delivery. As a result, strong demand has outpaced record inventory expansion, leading to low vacancy. Positive market fundamentals and pro-business government policies attract investors and developers, which should fuel further investment this year.
Demographics
Just over 2.4 million people live within 50 miles of the market’s core, with a projected five-year growth rate of 6.4%. There is a population of 29.1 million within 250 miles, more than Houston, St. Louis and Memphis.
Figure 1: Nashville Population Analysis
The local warehouse labor force of 54,204 is expected to grow by 13% by 2034, according to CBRE Labor Analytics. The average wage for a non-supervisory warehouse worker is $17.86 per hour, just above the national average.
Figure 2: Nashville Warehouse & Storage Labor Fundamentals
Location Incentives
Over the past five years, there have been more than 120 economic incentives deals totaling more than $260 million for an average of $9,300 per new job in metro Nashville, according to fDi Intelligence.
CBRE’s Location Incentives Group reports that top incentive programs in Tennessee include the Job Tax Credit. It offers a one-time corporate income tax credit to businesses that create at least 25 new jobs within three years and make a minimum capital investment of $500,000. The tax credit may offset up to 50% of franchise and excise taxes. Any unused credits may be carried forward for up to 15 years.
Figure 3: Top Incentive Programs
Note: The extent of state and local incentive offerings depends on location and scope of the operation.
Logistics Drivers
Nashville’s central location means 72% of the U.S. population can be reached within two days via ground delivery. It is one of six U.S. cities with three major intersecting interstate highways, creating a transportation network that attract top global logistics and distribution firms. With a $1.4 billion expansion project underway, Nashville International Airport continues growing its cargo-handling capabilities and has six air carriers servicing the market.
Supply & Demand
Nashville was one of the U.S.’s top-performing and fastest-growing industrial markets in 2023. However, there may be an increase in available space this year due to a high volume of construction completions.
The market consists of 218 million sq. ft. of space, making it the U.S.’s 30th largest industrial market. Despite this, it had the U.S.’s eighth-most net absorption last year, at 9.7 million sq. ft., making it the country’s fourth-highest growth market (net absorption/existing inventory). Significant demand for space kept vacancy rates at 3.4% at year-end, 140 basis points lower than the national average. This led to asking rents hitting a record high of $7.84 per sq. ft., a 5.8% year-over-year increase. Developers noticed Nashville’s strong fundamentals and increased construction activity to 10.3 million sq. ft. by the end of last year, with most of it being speculative and available space. This will likely increase the vacancy rate in the near term. However, continued strong demand and slowdown in construction activity should make the vacancy increase relatively short-lived. Overall, Nashville has the potential to be one of the U.S.’s top emerging industrial markets for the foreseeable future.
Figure 4: Nashville, Historical Data
Figure 5: Nashville, Size Range Comparison
Emerging Industrial Markets
Spotlighting markets across North America that offer demographic, logistics and incentives advantages for industrial investors and occupiers
Contacts
James Breeze
Vice President, Global Industrial and Retail Research
John Morris
President, Americas Industrial & Logistics
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