downtown warehouse

The Nashville-area industrial real estate market looks a lot like the red-hot (though slackening) housing sector, as logistics and manufacturing companies jockey for space to meet surging demand.

Industrial rental rates have reached a record high in Nashville. Within the sector, the average triple-net asking lease rate in Q3 was $6.16 per square foot — a 12-percent increase year-over-year, according to CBRE broker Steve Preston.

Soaring demand is driving up rents, he said. Retailers and manufacturers have been renting space faster than developers can build it as they race to fulfill surging online orders accelerated by the pandemic.

“Logistics providers, retailers and manufacturers are adding more warehouses to serve as regional hubs to deliver goods faster and cut transportation costs,” he said. “Companies are also looking to keep more inventory on hand to guard against shortages.”

Historically, rental rates have been higher in Nashville than in other cities because of its central location and proximity to consumers nationwide. More than 40 million consumers are located within a 325-mile radius of downtown Nashville, allowing truck drivers — who cannot drive more than 750 miles or 11 hours without a 1 hour break — to pick up and drop off a load in a single shift, according to statistics from FedEx. A truck leaving Nashville is within an overnight drive of 72 percent of the country’s population.


More than 7.6 million square feet of industrial product (warehouse, manufacturing and flex space) has already been added to the Nashville market in 2021, an all-time record high for the market, according to CBRE’s research team.

The Nashville area had three major deliveries in the third quarter: Beckwith Farms Building 7 (609,600 square feet) in the Elm Hill Pike/I-40 area, Speedway Industrial Park Building 9 (400,960 square feet) in the I-840 area and 710 Myatt Drive (130,000 square feet) in the Northeast/I-65 corridor. Logistics giant Prologis is developing more than 1.2 million square feet of warehouse space in West Davidson County.

The seed money behind industrial spaces remains the same, according to CBRE. Most new deliveries are still developed by private groups who have more time and local intel than REITs  to acquire and rezone land and build facilities, according to Preston. Of course, there are exceptions to the trend. First Industrial and Prologis, two large REITs, have ratcheted up on the development side, according to Preston.

Private developers are increasingly selling to REITs right before or upon completion.

“It creates a situation similar to the housing market, where there’s limited supply and multiple bidders,” Preston said. “With construction delays, there’s fewer viable options for REITs or large operators to acquire.”

There are roughly 5.8 million square feet of industrial space under construction in Metro Nashville, according to CBRE. The I-840 submarket is the most active submarket, accounting for more than 4.3 million square feet — three-fourths — of the construction underway.

"While it is becoming more difficult to develop along I-24 and tenants still need to expand,” JLL broker Perry Wolcott said. “Development and tenant focus is shifting to the I-840 corridor because there is more developable land and tenants are more likely to retain their labor forces than if they were to move to the Northeast and Southwest I-65 corridor."

If tenants relocated to Spring Hill or Springfield, it’s likely employers would lose a significant portion of their workforce due to increased commute times, Wolcott said.

Overall Outlook

Those in the industry predict asking rents to continue to rise, as demand for space is expected to continue to increase and constraints hamper new construction.

“Rising construction costs and land scarcity continue to put pressure on the supply side, especially for larger buildings with higher ceilings and ample parking to accommodate labor intensive e-commerce fulfillment,” Preston said.

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