Future Cities
2023 North America Industrial Big Box Review & Outlook: Nashville
April 4, 2023 5 Minute Read
Nashville continues to be a top big-box market due to its logistically prime location within a two-day truck drive of 72% of the U.S. population. It also has a pro-business climate, no state income tax and a diverse talent pool. Big-box demand has compressed Nashville’s vacancy rate, driving rent growth and continued development demand. Despite the macroeconomic climate, more tenants are seeking larger spaces, which favors big-box product. We anticipate a continued robust development pipeline and healthy absorption numbers, as investors and occupiers continue seeking prime industrial opportunities.
Demographics
Just over 2.4 million people live within 50 miles of Nashville’s core, with a projected five-year growth rate of 5.8%, the most for any market in this report. 29 million people are in a 250-mile radius, more than Houston, St. Louis and Memphis.
Figure 1: Nashville Population Analysis
Source: CBRE Location Intelligence, Q4 2022.
According to CBRE Labor Analytics, the local warehouse labor force of 46,966 is expected to grow by 15.9% by 2032, the fourth largest for any market on this report. The average wage for a non-supervisory warehouse worker is $17.03 per hour, 1% above the national average.
Figure 2: Nashville Warehouse & Storage Labor Fundamentals
Source: CBRE Labor Analytics, Q4 2022.
*Median wage (1 year experience); non-supervisory warehouse material handlers.
Location Incentives
Over the past five years, there have been 117 publicly known economic incentives deals totaling over $374 million for an average of $10,880 per new job in metro Nashville, according to Wavteq.
CBRE’s Location Incentives Group reports that top incentive programs in Tennessee include the Job Tax Credit, offering a one-time corporate income tax credit to businesses that create at least 25 new jobs within three years and make a $500,000 minimum capital investment. 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: Nashville Top Incentive Programs
Source: CBRE Location Incentives Group, Q4 2022.
Note: The extent, if any, of state and local incentive offerings depends on location and scope of the operation.
Logistics Driver
Nashville’s central location places 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 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, including FedEx, servicing the market.
Nashville’s central location places it within two-day ground delivery of 72% of the U.S. population.
Capital Markets
Nashville remains a top Southeastern growth market, aided by population growth and low vacancy. The city’s stabilized cap rates are very close to U.S. Tier I markets.
Supply & Demand
Nashville continues to experience strong big-box fundamentals due to its central location and population growth. Leasing activity finished the year at 6.9 million sq. ft. While below 2021’s record level, this was nearly double 2020’s total. Net absorption hit a record in 2022 at 6 million sq. ft., helping vacancy rates stay below 3% for the third consecutive year, at 2.5%. 3PLs accounted for 42.4% of total leases.
7.7 million sq. ft. was under construction by year’s end, with 23.3% pre-leased. Construction volume is twice that of existing space. This could increase vacancies if lease transactions decline in 2023. Given the region’s benefits, CBRE projects continued occupier demand despite an economic slowdown.
Figure 4: Share of 2022 Leasing by Occupier Type
Note: Includes new leases and renewals 200,000 sq. ft. and above.
Source: CBRE Research, 2022.
Figure 5: Lease Transaction Volume by Size Range
Note: Includes new leases and renewals 200,000 sq. ft. and above.
Source: CBRE Research, 2022.
Figure 6: 2022 Construction Completions vs. Overall Net Absorption by Size Range
Source: CBRE Research, 2022.
Figure 7: Direct Vacancy Rate by Size Range
Source: CBRE Research, 2022.
Figure 8: Under Construction & Percentage Preleased
Source: CBRE Research, 2022.
Figure 9: First Year Taking Rents (psf/yr)
Note: Includes first year taking rents for leases 200,000 sq. ft. and above.
Source: CBRE Research, 2022.
Explore Big Box Insights by Market
Kansas City’s biggest draw is its easy reach to a large portion of the country. More than 2.4 million people live within 50 miles of the market core.
Nearly 30 million people—24% aged 18-34—live within 250 miles of downtown Louisville, with a 1% projected five-year growth rate.
Memphis has over 1.4 million people within 50 miles of its core, and 23.4% are aged 18-34.
Contacts
Jack Armstrong
Senior Vice President
John Morris
President, Americas Industrial & Logistics, Advisory Services
