TRG | The Bottom Line – 3/17

While the market is slowly recognizing the strength of large commercial/non-res projects driving growth in that end market, questions remain on light commercial, most notably office space. As TRG prepares for its 8th annual Construction & Industrial Conference to be held March 29-30, we look to our own backyard for clues. Cushman & Wakefield recently published its Q4’22 Nashville Office MarketBeat, highlighting Nashville’s economy continued to remain strong in recording unemployment at only 2.7%, 100 bps below the U.S. average. Nashville was one of the fastest markets in the country to recover from pandemic lows as tourism, healthcare, and business services returned to pre-COVID-19 levels in terms of volume and productivity. Despite the housing market projected to enter a correction period, Nashville’s diverse economy continues to gain new jobs and strong population migration from northern (lead by NY & IL) and western states (mostly southern CA). According to Cushman & Wakefield, overall vacancy dropped 20 bps sequentially to 19.5%, while overall gross asking rents posted a ~5% YOY increase to $32.29 psf. Nashville’s office market recorded more than 616,000 square feet of leasing activity for Q4’22, bringing total annual activity to nearly 2.7 million square feet. Nashville’s suburban submarkets performed exceptionally in Q4’22, driven by both headquarter relocations and expansion of existing businesses. “Steady” appears to be the theme, although we acknowledge Nashville is the heart of a broad population push to the southeast/southwest. We aim to gain greater clarity on current trends and views on 3-5 year projections in just a few short weeks from our valued private companies participating in TRG’s C&I Conference.