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

Strong Performance Continues in Nashville’s Apartment Market in 3Q

Research & Forecast Report

NASHVILLE | MULTIFAMILY3rd Quarter 2016

Key Takeaways > At the end of 3Q 2016, work was underway on 61 multifamily properties totaling 15,627 units.

Of that total, 10,089 units are scheduled for completion in the next 12 months.

> Nashville’s multifamily market absorbed 4,513 units over the last 12 months. Central Nashville and Murfreesboro/Smyrna have led the metro in demand over the past few quarters.

> Nashville’s annual rent growth of 7.0% in 3Q 2016 ranked among the top ten in the nation.

Nashville Multifamily MarketAccording to MPF Research, Nashville’s existing inventory base increased 8.5% over the past two years and is set to grow another 7.7% over the next 12 months. The quarterly supply grew by 1,078 units and the annual supply of new units reached nearly 5,460 units. Nashville’s apartment market recorded average occupancy of 96% over the last five years, leading to increased demand and rent growth levels.

At the end of 3Q 2016, work was underway on 61 multifamily properties totaling 15,627 units. Of that total, 10,089 units are scheduled for completion in the next 12 months. Thirty-nine percent of these units are located in Central Nashville.

Nashville’s apartment demand has remained robust, with annual absorption of about 3,600 units to 5,600 units in each of the past six quarters. The Nashville MSA absorbed 4,513 units in 3Q 2016, lagging net supply for the first time since 2Q 2015.

In the year-ending 3Q 2016, transaction volumes totaled $1..1 billion, a 12.2% increase over 3Q 2015. Nashville had the 16th largest volume in the south and ranked 35th nationally. Transaction activity yielded an average price of about $128,000 per unit in year-ending 3Q 2016. The average cap rate for YE 3Q 2016 stood at 5.52%, the 15th lowest among the top 100 U.S. metros.

In the coming year, supply is expected to remain in record-high territory, with 10,089 units scheduled to complete within that time frame. Occupancy may decrease slightly and rent growth could slow, yet market indicators suggest that Nashville has the potential to be an outperformer with regards to occupancy and rent growth.

UNITS UNDER CONSTRUCTIONSUBMARKET UNITS

Central Nashville 6,168

North Nashville 1,849

West Nashville 1,764

Far East Nashville 1,425

Franklin/Brentwood 1,184

East Nashville 1,169

Murfreesboro/Smyrna 1,080

South Nashville 650

Southeast Nashville 244

Sumner County 94

Total 15,627

UNITS COMPLETING IN 12 MOS.SUBMARKET UNITS

Central Nashville 4,300

Franklin/Brentwood 1,184

Murfreesboro/Smyrna 1,080

West Nashville 843

North Nashville 824

Far East Nashville 790

South Nashville 650

East Nashville 324

Sumner County 94

Southeast Nashville 0

Total 10,089

Multifamily Development - Submarket Rankings

Summary Statistics 3Q 2016 Nashville Multifamily Market

Existing Units 131,519

Quarterly Supply 1,078

Current Occupancy Rate 96.4%

Quarterly Occupancy Change -0.2%

Under Construction (units) 15,627

Monthly Rent $1,116

Rent per Square Foot $1.150

Quarterly Rent Change 2.7%

Annual Rent Change 7.0%

One-Year Forecast

Annual Supply 10,089 unitsAnnual Demand 8,027 unitsAnnual Rent Change 4.3%Occupancy -1.2%

OCCUPANCY

SUBMARKET OCCUPANCY %

North Nashville 98.0%

Southeast Nashville 96.9%

South Nashville 97.4%

Far East Nashville 96.9%

West Nashville 96.2%

Sumner County 97.1%

East Nashville 94.4%

Murfreesboro/Smyrna 96.7%

Central Nashville 95.7%

Franklin/Brentwood 94.3%

MONTHLY RENT

SUBMARKET RATE

Central Nashville $1,558

Franklin/Brentwood $1,429

West Nashville $1,219

Murfreesboro/Smyrna $1,102

South Nashville $1,057

Far East Nashville $1,036

Sumner County $1,029

East Nashville $1,007

North Nashville $934

Southeast Nashville $931

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 - 3Q Rankings

QTRLY RENT CHANGE

SUBMARKET RATE

South Nashville 5.9%

Southeast Nashville 4.8%

Sumner County 4.3%

West Nashville 3.7%

East Nashville 2.3%

North Nashville 2.2%

Far East Nashville 1.6%

Franklin/Brentwood 1.3%

Murfreesboro/Smyrna 1.0%

Central Nashville 0.9%

QTRLY OCCUPANCY CHANGE

SUBMARKET RATE

Murfreesboro/Smyrna 1.4%

Central Nashville 0.9%

Sumner County 0.3%

Franklin/Brentwood 0.1%

South Nashville 0.1%

North Nashville -0.3%

Far East Nashville -0.3%

West Nashville -0.7%

Southeast Nashville -0.9%

East Nashville -2.3%

Source: MPF Research

Historical Occupancy Rates

Source: MPF Research

#4#3#5#1Largest Household Income Gain in

the U.S -BLS (September 2016)

Best Cities for Jobs this Fall - Manpower Group (September 2016)

Best Real-Estate Markets - WalletHub (August 2016)

Friendliest Cities in the U.S - Condé Nast Traveler (May 2016)

$600

$700

$800

$900

$1000

$1100

3Q162Q161Q164Q153Q152Q151Q154Q143Q142Q141Q144Q133Q142Q131Q134Q123Q122Q121Q124Q113Q112Q111Q11

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%

96.4%96.3%

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

3Q INVESTMENT ACTIVITY

PROPERTY BUYER UNITS SALE PRICE PRICE/UNIT

One MetroCenter Metrocenter Apartments X LLC 320 $67,400,000 $210,547

Venue at Glenbrook Sentinel Real Estate 312 $52,700,000 $168,817

Arbors of Brentwood Redwood Capital Group 346 $45,300,000 $130,780

Wyndchase at Bellevue Strata Equity Group 234 $36,500,000 $155,983

River Oaks TIAA-CREF 200 $36,300,000 $181,500

Waterford Landing Strata Equity Group 184 $25,800,000 $140,362

Falls at 109 Timberland Partners 210 $24,200,000 $115,119

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

650

700

750

800

850

900

950

May-16Jan-16Sept-15May-15Jan-15Sep-14May-14Jan-14Sep-13May-13Jan-13Sep-12May-12Jan-12Sep-11May-11Jan-11Sep-10May-10Jan-10

Non-

Farm

Em

ploy

men

t

0%

2%

4%

6%

8%

10%

12%

Unemploym

ent Rate

Unemployment RateNon-Farm Employment

Terra House

3 Nashville Research & Forecast Report | 3Q 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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