Nashville MSA | Housing Permit Activity

0

5,000

10,000

15,000

20,000

2017201620152014201320122011201020092008

New

Hou

sing

Per

mits

One Unit Permit Multi-Unit Permit

Source: U.S. Census Bureau

Multifamily Investment in Nashville tops $1 Billion for Third Consecutive Year

Research & Forecast Report

NASHVILLE | MULTIFAMILY4th Quarter 2016

UNITS UNDER CONSTRUCTIONSUBMARKET UNITS

Central Nashville 4,994

West Nashville 1,502

Far East Nashville 1,425

Franklin/Brentwood 1,193

North Nashville 915

South Nashville 902

East Nashville 845

Murfreesboro/Smyrna 576

Southeast Nashville 244

Sumner County 0

Total 12,596

UNITS COMPLETING IN 12 MOS.SUBMARKET UNITS

Central Nashville 3,177

Franklin/Brentwood 1,193

Far East Nashville 1,065

North Nashville 675

South Nashville 650

West Nashville 581

Murfreesboro/Smyrna 576

East Nashville 245

Southeast Nashville 244

Sumner County 0

Total 8,406

Multifamily Development - Submarket Rankings

Key Takeaways > In 2016, the Nashville Market absorbed 6,289 units, the largest volume in over a decade.

> Total transaction volume for 2016 topped $1.29 billion, with an average cap rate of 6.16%.

> Supply totaled 7,367 units in 2016, and inventory is scheduled to increase 9.4% based on construction activity at the end of 4Q 2016.

> Nashville’s rent growth of 6.5% in 2016 is a 20-year record high, and demand will likely continue to support this growth in the 3.5% to 4.5% range over the next 12 months.

Nashville Multifamily MarketAccording to ULI’s Emerging Trends in Real Estate 2017 Survey, Nashville has transitioned to an upper-tier secondary market, and the increased level of investor interest bode well for Middle Tennessee in 2016. Nashville’s multifamily market experienced another banner year, with investments in apartments topping $1.29 billion in 2016, the third consecutive year exceeding $1 billion.

The combination of steady population growth and net in-migration, a strong and diverse economy, and favorable demographic trends served as a catalyst for demand during 2016. The multifamily market benefitted from these trends, and construction levels remained strong throughout 2016 to accommodate this growth. Nashville delivered 7,367 units in 2016, a multi-decade high.

Growth in Nashville’s employment base and in the population has been a boon to the region’s apartment market, which has led to robust demand and inflated rent growth. Over the next 12 months, new development will come online at some of the highest levels the market has experienced. As such, MPF Research expects occupancy to slip slightly and rent growth to slow from current levels. As supply normalizes, Nashville is expected to be a long-term performer in terms of occupancy and rent growth.

Summary Statistics 4Q 2016 Nashville Multifamily Market

Existing Units 133,911

Quarterly Supply 3,163

Current Occupancy Rate 95.8%

Quarterly Occupancy Change -0.6%

Under Construction (units) 12,596

Monthly Rent $1,104

Rent per Square Foot $1.14

Quarterly Rent Change -0.5%

Annual Rent Change 6.5%

One-Year Forecast

Annual Supply 8,406 unitsAnnual Demand 6,203 unitsAnnual Rent Change 4.0%Occupancy -1.4%

OCCUPANCY

SUBMARKET OCCUPANCY %

North Nashville 97.7%

Southeast Nashville 96.9%

South Nashville 96.7%

Far East Nashville 96.5%

Sumner County 96.1%

East Nashville 96.0%

Murfreesboro/Smyrna 95.3%

Central Nashville 95.0%

Franklin/Brentwood 94.5%

West Nashville 93.8%

MONTHLY RENT

SUBMARKET RATE

Central Nashville $1,589

Franklin/Brentwood $1,387

West Nashville $1,202

Murfreesboro/Smyrna $1,074

South Nashville $1,033

Far East Nashville $1,042

Sumner County $1,023

East Nashville $1,012

North Nashville $957

Southeast Nashville $917

Historical Rental Rates

67

8

910

3

245

1

1. Central Nashville2. East Nashville3. Southeast Nashville4. South Nashville5. West Nashville6. North Nashville7. Sumner County8. Far East Nashville9. Murfreesboro/Smyrna10. Franklin/Brentwood

Submarket Overview - 4Q Rankings

QTRLY RENT CHANGE

SUBMARKET RATE

South Nashville -0.7%

Southeast Nashville -1.3%

Sumner County -0.4%

West Nashville -1.3%

East Nashville 0.3%

North Nashville 0.5%

Far East Nashville 0.1%

Franklin/Brentwood -0.5%

Murfreesboro/Smyrna -0.5%

Central Nashville 0.2%

QTRLY OCCUPANCY CHANGE

SUBMARKET RATE

East Nashville 1.6%

Franklin/Brentwood 0.2%

Southeast Nashville 0.0%

North Nashville -0.3%

Far East Nashville -0.4%

Central Nashville -0.7%

South Nashville -0.7%

Sumner County -1.0%

Murfreesboro/Smyrna -1.4%

West Nashville -2.4%

Source: MPF Research

Historical Occupancy Rates

Source: MPF Research

#1#7#3#6Nation’s Top Cities for Real Estate

Investing in 2017 - PricewaterhouseCoopers (November 2017)

Cities for Job Seekers in 2017 - NerdWallet (December 2016)

2016 Best-Performing Cities - Milken Institute (December 2016)

Hottest Housing Market in U.S. - Freddie Mac (December 2016)

$600

$700

$800

$900

$1000

$1100

4Q16

3Q16

2Q16

1Q16

4Q15

3Q15

2Q15

1Q15

4Q14

3Q14

2Q14

1Q14

4Q13

3Q14

2Q13

1Q13

4Q12

3Q12

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

2011 2012 2013 2014 2015 2016

93.8%

94.1%

95.0%

95.6%

95.1%

95.7%95.8%

95.1%

94.9%

95.8%

96.0% 96.0%

95.8%

96.1% 96.1%

95.1%

95.5% 95.5%

96.3%

95.2%

96.6%

96.3%

95.8%

96.4%

2 Nashville Research & Forecast Report | 4Q 2016 | Multifamily | Colliers International

2016 NOTABLE INVESTMENT DEALS

PROPERTY BUYER UNITS SALE PRICE PRICE/UNIT

The Landings of Brentwood

Steadfast Apartment REIT 724 $110,000,000 $151,934

One MetroCenter Sherman Residential 320 $67,375,000 $210,547

Bellevue West Oaktree, Bascom Group 560 $63,250,000 $112,946

The Artessa Loma Linda U Endowment 250 $57,500,000 $230,000

Venue at Glenbrook Sentinel Real Estate 312 $52,671,000 $168,817

The Overlook Apartments Passco Companies 452 $51,106,750 $115,280

Grand Oak at Town Park Starlight Investments 300 $49,600,000 $165,333

DEVELOPMENT LEADERS

DEVELOPER UNITS COMPLETED IN THE LAST 12 MOS.

UNITS UNDER CONSTRUCTION

TOTAL UNITS

Lifestyle Communities 403 1,051 1,454

Giarratana Nashville LLC 288 663 951

Bristol Development Group 393 392 785

SWH Residential Partners LLC 194 467 661

The Residential Group LLC 640 0 640

Source: Real Capital Analytics

Cost of Living Index

Source: Nashville Area Chamber of Commerce

Seattle 140.3

San Francisco 176.4

Los Angeles 140.3

Austin 96.0

Tampa 91.6

Chicago 116.2

Indianapolis 91.1

Nashville 95.2

Atlanta 99.9

Raleigh 90.5

Charlotte 96.4

New York City 227.4

Boston 144.3

Source: FRED Economic Data

Employment/Unemployment

Cumulative Monthly Volume ($mil)

0

260

520

780

1040

1300

2013201420152016

DNOSAJJMAMFJ

650

700

750

800

850

900

950

Nov-

16

Aug-

15

May

-16

Feb-

16

Nov-

15

Aug-

15

May

-15

Feb-

15

Nov-

14

Aug-

14

May

-14

Feb-

14

Nov-

13

Aug-

13

May

-13

Feb-

13

Nov-

12

Aug-

12

May

-12

Feb-

12

Non-

Farm

Em

ploy

men

t

0%

2%

4%

6%

8%

10%

12%

Unemploym

ent Rate

Unemployment RateNon-Farm Employment

3 Nashville Research & Forecast Report | 4Q 2016 | Multifamily | Colliers International

Copyright © 2015 Colliers International.

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

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