Retail Vacancy Under 4% for Thirteenth Consecutive Quarter at Mid-Year 2019

Research & Forecast Report

NASHVILLE | RETAIL2nd Quarter 2019

MARKET INDICATORSRelative to prior period 2Q 2019 3Q 2019*

VACANCY

NET ABSORPTION

CONSTRUCTION

RENTAL RATE

Nashville Market According to FRED Economic Data, average non-farm employment in the metro area grew by 2.4% between May 2018 and May 2019, representing the net addition of 44,173 jobs. The Bureau of Labor Statistics reports that the Leisure and Hospitality sector had a 5.9% gain with 3,600 jobs added over the same time frame. Nashville continues to average 3% year over year job growth, indicative of the city’s expansion and demand for workers.

The first half of 2019 has been remarkable for Nashville’s tourism and hospitality industry, resulting in astounding economic impact numbers and tourism. In May, Nashville hosted the 2019 National Football League draft, drawing a combined 600,000 people during the three-day event. The draft generated a record $132 million in direct visitor spending, exceeding the $74 million (record) at the 2018 draft in Dallas. Overall, the draft produced an economic impact of $223.9 million, according to The Tennessean. In June, Nashville’s annual CMA Fest drew thousands of visitors and locals to Downtown Nashville. This four-day event boasted over 300 music artists and six large stages located along Broadway. These large events that draw thousands of people to Nashville continue to bode well for area restaurants, shops and retailers throughout the region.

Nashville’s retail market closed out the first half of 2019 with 78,926 square feet of positive absorption, bringing the YTD net absorption to 435,895 square feet. The sub-4% market vacancy continues to drive demand and development activity throughout Middle Tennessee. Nearly half of Nashvlle’s twelve retail submarkets have vacancy under 3%. Asking rental rates have been trending upward since 3Q 2014 and have remained over $40.00 per square foot for new retail product in high-demand submarkets including Downtown, Cool Springs, and West End.

Nashville’s retail market delivered 134,166 square feet in deliveries this quarter and the majority of the space is pre-leased. An additional 445,602 square feet of space is currently under construction throughout the market, fueled by continued demand for new Class A space.

SUMMARY STATISTICS 2Q 2019 Nashville Retail Market

EntireMarket

Total Vacancy Rate 3.3%

Change From 1Q 2019 +0.1%

2Q Absorption (SF) 78,926

Under Construction (SF) 445,602

Market Average Rental Rate $24.72

Unemployment May-18 May-19 Nashville 2.4% 2.4% Tennessee 3.6% 3.3%U.S. 4.3% 3.6%

Job Growth Annual Change # of Jobs Nashville 2.3% 44,173Tennessee 1.6% 48,000U.S. 0.7% 1.2M

JOB GROWTH & UNEMPLOYMENT

HILLSIDE CENTERBest Place to Start a Business in America

- INC (2019)

Regional Workforce Development in South Central US (Tennessee) - Site Selection Magazine (2019)

Best Place to Live in Tennessee - U.S. News & World Report (2019)

Best Summer Travel Destinations - Wallethub (2019)

#1#1#4

#9

FOUR HUNDRED FIFTHRETAIL: Tri-Brand Marriott

Absorption & Leasing Activity > Nashville experienced solid absorption of 78,926 square feet during Q2, bringing the YTD absorption to 435,895 square feet.

> The suburban submarkets that experienced the most demand during the second quarter were the Southeast Corridor, Mount Juliet/Lebanon, and Bellevue/West Nashville, totaling a combined 101,329 square feet.

> The largest negative absorption in the market in Q2 was the move-out of Ace Hardware in the Brentwood submarket. The company is relocating to new construction in the Cool Springs/Franklin submarket.

> Absorption is expected to escalate over the next 12 months as multiple large tenants move into new construction. Absorption at mid-year 2019 has surpassed 2018’s net absorption by 281,871 square feet, and is slated to keep pace with the million square feet absorptions of 2017 and 2016.

2 Nashville Research & Forecast Report | 2Q 2019 | Retail | Colliers International

DEMOGRAPHICS | NASHVILLE MSA

1.90M (2017) 1.8% Annual Population Growth

POPULATION POPULATION PROJECTION

1.95M (2020)

INCOME PROJECTION

$64,700 (2020)

AVG HOUSEHOLD INCOME

$82,049 (2016)

EDUCATION

Graduate Degree: 12%Bachelor’s Degree: 22%Associate’s Degree: 7.2%

UNEMPLOYMENT RATE

2.4% (May-19)

Retail ConstructionAt mid-year 2019, 17 buildings totaling 275,854 square feet of retail space were completed in the Nashville retail market. Nashville has about 445,602 square feet of retail space under construction.

The Cool Springs/Franklin corridor experienced the largest gain in new inventory this quarter with the completion of the 37,396 square foot Hillside Center in Nolensville. The project will deliver at 50% pre-leased by tenants including Marco’s Pizza, Sweet CiCi’s, Lux Group, and Serendipity Pottery and Gifts. The Tri-Brand Marriott Hotel delivered in Q2, adding 11,420 square feet of prime retail space downtown.

The Downtown submarket has the most retail product under construction, totaling 221,500 square feet. These projects include Fifth + Broadway located on the site of the former Nashville Convention Center, and Whole Foods at 1200 Broadway.

Colliers Inventory - Statistical set consists of all retail properties above 10,000 SF, including owner-occupied. While Colliers attempts to provide the most accurate data at the end of every quarter, revisions are made throughout the year accounting for discrepancies in past reporting.

Source: CoStar & Colliers International Research

HENDERSONVILLE / GALLATIN

BELLEVUE / WEST NASHVILLE

FRANKLIN / COOL SPRINGS

BRENTWOOD

SOUTHEAST CORRIDOR

DONELSON / HERMITAGE

NORTHNASHVILLE

MT. JULIET /LEBANON

RUTHERFORDCOUNTY

GREEN HILLS / BELLE MEADE

WESTEND

CBD

100

41431

155 70

3 Nashville Research & Forecast Report | 2Q 2019 | Retail | Colliers International

NASHVILLE RETAIL MARKET

MARKET BUILDINGS INVENTORY (SF)

TOTAL VACANT (SF)

VACANCY RATE

2Q NET ABSORPTION

YTD NET ABSORPTION

AVERAGE ASKINGRATE PSF (NNN)

BELLEVUE/WEST NASHVILLE 120 4,549,745 82,852 1.82% 26,421 26,698 $24.25

BRENTWOOD 66 2,723,592 64,117 2.35% -30,276 -5,429 $24.70

COOL SPRINGS/FRANKLIN 256 10,935,780 174,058 1.59% 7,571 64,136 $28.88

DONELSON/HERMITAGE 107 4,994,043 223,894 4.48% -3,185 86,446 $20.12

DOWNTOWN 124 2,773,854 151,530 5.46% -11,868 3,791 $38.81

GREEN HILLS/BELLE MEADE 72 3,332,469 94,707 2.84% 1,215 23,037 $24.30

HENDERSONVILLE/GALLATIN 185 6,196,436 189,292 3.05% -659 190,101 $18.72

MT. JULIET/LEBANON 175 5,952,489 92,643 1.56% 35,619 35,550 $20.15

NORTH NASHVILLE 223 7,904,785 356,099 4.50% 9,684 -22,473 $17.13

RUTHERFORD COUNTY 320 12,267,374 598,095 4.88% 20,986 -11,171 $14.05

SOUTHEAST CORRIDOR 221 8,488,384 352,936 4.16% 39,289 57,343 $16.78

WEST END 84 2,071,372 45,341 2.19% -15,871 -12,134 $32.34

MARKET TOTAL 1,953 72,190,323 2,425,564 3.36% 78,926 435,895 $24.72

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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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REGIONAL AUTHOR:Katie Lester CPRCDirector of Research+1 615 850 2758katie.lester@colliers.com