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Despite the Tightening of Fundamentals, Nashville's West End/CBD Experiences Rent Losses

CoStar Market Insights: Rent Growth Weakens in the Urban Core
October 2, 2018
Aerial of the 201-room Hyatt Hotel under construction in Nashville’s West End submarket.

West End/CBD has been Nashville’s most active submarket this cycle, taking up about half of the metropolitan area’s deliveries since 2015.

Developers have been attracted to this high-growth submarket that has been home to many corporate relocations, including HCA and Bridgestone, which have fueled strong job growth. Baby Boomers are giving up their single-family homes, and some millennials are “delaying adulting,” both of which bring high-earning renters to the area.

This submarket is definitely feeling growing pains, with vacancies that have been above 10 percent since the beginning of 2015. It appears that 2017 was the peak year for development for this submarket, pushing the vacancy rate to north of 20 percent.

On a positive note, vacancies have compressed by one of the fastest rates in the country in 2018 due to this area seeing record-levels of absorption. Properties in lease-up here are averaging about 20 units per month compared to the metropolitan average of about 15 units per month. But even with record-levels of absorption, vacancies here are still the highest in Nashville.

While fundamentals have improved, rent growth has remained negative for most of 2018. Some projects are having trouble standing out from the crowd, with many landlords lowering rents and offering concessions. But the average is less than one month free, down from 2017’s average of up to two months free.

With close to 3,000 units (15 percent of inventory) set to deliver over the next few years, this next supply wave will further test the submarket to see how much new supply it can handle.

CoStar Market Insights provides a snapshot of recent real estate trends. The CoStar Market Analytics team monitors commercial and multifamily real estate across 390 metro areas, with a granular understanding of the projects, players and economic trends that move these markets.

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