Written by Hi Lewis, SIOR, and Reprinted with Permission From Nashville Business Journal.
It goes without saying that the last 18 months have been one of the most chaotic periods in over a generation. But through the uncertainty and confusion, one business sector in Nashville has been remarkably consistent: industrial commercial real estate.
Fueled by e-commerce growth and a flood of new companies from California and the Northeast arriving to enjoy Tennessee's business-friendly environment, Nashville’s already robust industrial market continues to be a pillar of the local economy. Though the industry was already robust before the pandemic, its rise in Nashville since Q2 2020 has been nothing short of remarkable. And for some types of property, availability is becoming scarce.
Overall, the market has a vacancy rate of just three percent. To meet this appetite, roughly 6.5 million square-feet of new industrial space has already been delivered (and spoken for), and more than 10 million square-feet is slated for, or already under construction, according to a Q1 2021 industrial market report from CoStar.
While the market is extremely healthy, that doesn’t mean there aren’t challenges to overcome. But what are they, and how can business owners, landlords, and commercial brokers navigate possible speed bumps?
Know what you need, have a plan, and move fast
Demand for industrial property continues to outpace supply, and even with new product coming online, finding the right location will continue to be a process that rewards decisive action. For those interested in securing space, it pays to be prepared and act within 24 hours of touring a building.
Before searching for a space, sit down with your team to discuss exactly what’s required, and know what costs you’re prepared to work with. If a property fits the defined parameters and the terms are agreeable, make the deal – because someone else absolutely will.
To expedite the process and make sure a great opportunity doesn’t slip away, work with a knowledgeable broker. Brokers with the SIOR (Society of Industrial and Office Realtors) designation are educated, informed, and connected. SIOR’s are proven to be the top brokers in any given market, and through the SIOR network, can have your real estate needs covered in any location across the globe.
Rents Are rising. And rising. And rising...
As with all products, as demand increases, so does the price. With so many interested parties going after a finite amount of industrial space, rents have continued to increase. And just when it seems the rates can’t go any higher, another agreement proves that we are still continuing to see rent growth.
Nashville’s market is still adjusting to this new reality, and anyone interested in securing an industrial property should be prepared to see price-per-square-foot costs that were unthinkable just a few years ago. And then be prepared to see those rates eclipsed in just a matter of months.
Brokers: Do one thing, do it well
“Jack of all trades, master of none,” might be a good trait for some professions, but not commercial real estate. Brokers who dial-in on a specific aspect of the industry, and become an authority in that area, soon become the automatic go-to in the region. Chasing the market and spreading yourself too thin is both inefficient and short-sighted.
But by being the local expert, the market automatically comes to you and you can serve your clients with authority and expertise. This leads into the next point, and one of the best ways to ensure professional success no matter the economic climate.
Being connected has never been more important
We may live in Nashville, but the economy is increasingly global. Clients are looking for opportunities across the Southeast and even across the globe. It is critical to work with a broker who can quickly and easily refer clients to a knowledgeable broker in another market, wherever that may be.
When a business plan hinges on finding the ideal property, being a part of a global association such as SIOR, which is a collection of the world’s most accomplished and ethical commercial brokers, helps to tip the scales. And more importantly, can help you close the deal faster.
As we have seen over the past year, making bold predictions and proclamations produces poor results. But I can confidently say that Nashville’s industrial market will continue to rise for the foreseeable future. The real question is, are you prepared to take advantage?
This article originally appeared in the Nashville Business Journal.