Nashville Among Top Targets for Commercial Real Estate Investment in 2023, CBRE Survey Finds

A recent survey of commercial real estate investors ranked Nashville as a top 10 target among U.S. metros. Nashville ranks #5 in CBRE’s 2023 U.S. Investor Intentions Survey.

The survey found that more investors are prioritizing high-performing secondary markets in 2023 (as opposed to gateway markets), particularly those with strong job and population growth prospects, which can translate into greater potential for both equity and income growth. Sun Belt markets are the most appealing: Dallas is the top preferred market, followed by Austin.

“Over the last decade, Nashville has been one of the strongest apartment markets in the country,” said Brett Carr, First Vice President in CBRE’s Nashville office. “Tennessee continues to attract world-class businesses to the state, many of which are establishing a presence in the Nashville metro area. As a result, job and population growth continue to outpace our peer markets and stand as the driving forces in Nashville’s success.”

“While weakening macroeconomic conditions and rising interest rates will weigh on commercial real estate investment volumes in 2023, the amount of capital targeting the sector remains abundant,” said Chris Ludeman, Global President of Capital Markets for CBRE. “Investors are willing to accept more risk to achieve higher returns and other metrics such as lower leverage, increased debt service coverage ratio, and once again a focus on acquiring assets at a discount to replacement cost have all been pushed to the forefront. We expect investment activity to pick up in the second half of the year as market conditions stabilize.”

Commercial real estate lenders are also bullish on high-growth secondary markets, with Nashville ranking #4 in CBRE’s 2023 ranking of target markets for new loan origination. Sun-Belt markets are favored among lenders with Miami the top preferred market, followed by Raleigh-Durham.

“Nashville checks all the boxes for investors as the new ‘it’ city in the Southeast,” said K.O. Kennedy, Vice Chairman in CBRE’s Nashville office. “It’s a great place to live for those who enjoy live music, sports, nightlife and outdoor activities. With Nashville’s diverse economy, job growth, low unemployment rate and low tax and business-friendly environment, young people who move here are increasingly becoming permanent residents. The city also is home to 20 colleges, including Vanderbilt and Belmont Universities, which has led to a highly educated population that continues to attract a growing number of world-renowned companies to Nashville each year.”

Other Key Findings from the 2023 Survey (conducted in December 2022):

• Investors cite rising interest rates, a potential recession and limited credit availability as their greatest challenges this year.
• More than half of investors expect to decrease purchasing activity in 2023 compared with 2022 levels. Amid lower pricing dynamics, 60% of respondents say they will either sell less than last year or not sell at all.
• The most sought-after sectors remain multifamily, particularly apartment complexes, and industrial, led by modern logistics facilities in major markets. Grocery-anchored centers are the most popular subsector for retail investors, while office investors largely prefer Class A assets in prime locations.
• More investors will implement opportunistic and debt strategies than last year because of attractive returns amid higher interest rates and tighter financial market conditions.
• While investors remain committed to environmental, social and governance criteria (ESG), nearly half of respondents say that the worsening economic outlook will limit the extent to which they consider ESG criteria in their investment decisions.