Nashville’s Office Market Shows a Strong 1st Quarter

As of the end of the first quarter, Nashville’s office market had a construction pipeline that was considerably above the national rate, as it outpaced many U.S. metros, according to CommercialEdge data. However, new development has stagnated in terms of both starts and deliveries, lagging most of its peers.

Investment volume increased considerably when put against last year’s first three months but prices per square foot fell slightly.

From the vacancy standpoint, Nashville fared better than most of its peers and was below the national figure, with occupancy increasing year-over-year.

The coworking sector also showed a healthy performance, with the metro having one of the largest shares of flexible office space in the U.S.

One of the largest office pipelines

As of the end of March, Nashville’s office market had a construction pipeline of more than 3 million square feet across 11 properties, accounting for 4.5 percent of stock. It considerably surpassed the 1.5 percent national construction rate and outpaced many secondary markets such as Austin (3.9 percent), Charlotte (2.8 percent) and Atlanta (1.7 percent).

The largest project under construction in Nashville was Pinnacle Tower, a 650,000-square-foot building within the 19-acre Nashville Yards project. Upon completion, the $1 billion mixed-use campus is slated to include more than 3 million square feet of office space, along with sizable residential, hospitality and retail components. Recently, the Creative Artists Agency signed a lease for 75,000 square feet at another building within the campus.

In 2024’s first quarter, just a 300,000-square-foot property broke ground. In terms of deliveries, also only one building came online, comprising 32,000 square feet of office space within The Finery mixed-use project developed by Hines. Regarding sheer volume brought to market, Nashville lagged most of its peers including Phoenix (107,865 square feet), Atlanta (180,240 square feet) and Austin (635,250 square feet).

Additionally, a joint venture of Equitable Property Co. and Chapman Capital is eyeing a mixed-use development slated to include two medical office buildings totaling 400,000 square feet, along with a large retail and hospitality component. The partners recently acquired the 44-acre site in Smyrna, Tenn., and plan to break ground in 2025’s first quarter.

Nashville office investments on the rise

As of the end of March, a total of 306,492 square feet changed hands in the Nashville office market across three sales for a transaction volume of roughly $63 million. These figures represent a significant increase in activity compared to the 67,513 square feet that traded for $15.3 million in 2023’s first quarter.

The price per square foot clocked in at $200.9, an 11 percent decrease from the $225.9 registered in the metro in the same period last year. Nashville was pricier than many of its peers such as Atlanta ($110.6), Dallas ($141.3) and Phoenix ($187.3), but was considerably behind Austin’s whopping $506.6.

The largest transaction registered in the first quarter involved the 175,000-square-foot McEwen Building in the Cool Springs submarket. Boyle Investment Co. paid $48.8 million, acquiring the asset from KBS. At the time of the sale, the building was 95 percent leased to 15 office and retail tenants.

Vacancy ticks down in Nashville’s office market

The vacancy rate in Nashville’s office market clocked in at 15.5 percent at the end of the first quarter, representing a 190-basis-point decrease year-over-year. Vacancy was below the 18.2 percent national figure and the metro fared better than most of its peers such as Phoenix (18 percent), Dallas (21.7 percent), Austin (22 percent) and Denver (22.7 percent).

One of the largest moves to Nashville’s office market was Austin-based software company Oracle’s headquarters relocation. The company acquired a 65-acre site in the metro back in 2021, with plans to develop a $1.2 billion office campus and move 8,500 employees. In the interim, the company will be leasing office space.

Large coworking slice in Nashville

As of the end of March, there were 1.8 million square feet of coworking space in Nashville’s office market across 83 properties, accounting for 2.9 percent of total stock. The share of flexible space was far above the 1.8 percent national average, as the metro surpassed many of the other secondary markets such as Atlanta (2.1 percent), Denver (2.2 percent) and Raleigh-Durham (2.6 percent).

One of the largest flexible office space operators was Regus, with about 188,250 square feet across 10 properties. WeWork was second, with a 151,000-square-foot footprint across three locations, followed by Spaces, with 128,000 square feet in four properties.