As testament to the strength of demand in the recent term, the vacancy rate has dropped sharply and rents have staged substantial increases even as construction activity continued effectively unabated. A modest and temporary slowdown in deliveries in 2012 saw 242 market-rate units, all in the June completion of the Vista Germantown project in Nashville’s historic Germantown neighborhood, come on line during the first half of the year. Net absorption for the period was 829 units (July, with no new completions, followed with net absorption at 39). According to Reis’ late September report in individual construction projects, two market-rate developments with a combined total of 614 units are underway for completion by year-end. The 428-unit Venue at Cool Springs is scheduled for a November finish at 1001 Millwood Street in the Cool Springs area of Franklin; in the same south suburban town the 186-unit Grove Franklin Apartments will deliver in October.
In addition, fully 3,206 market-rate apartments in 13 projects were under construction per report date. Of these, 1,316 in five have been assigned 2013 delivery dates. That total, however, could rise: Reis’ mid-year analysis calls for the completion of nearly 1,700 units next year. An October start, meanwhile, is scheduled for a $40 million, 280-unit luxury project at 300 Seven Springs Way in Brentwood’s Seven Springs community. Solomon Builders and Evergreen Real Estate, both locally based, are the developers. A fall 2012 groundbreaking is expected with completion to follow in fall 2013, the Nashville Business Journal reported in August. Investment at about $143,000 per unit is cited. And, as described in the Special Real Estate Factors, a major high-rise, Nashville’s first in more than a decade, should be underway shortly in the city’s Gulch neighborhood near downtown. Development overall is dominated by central Nashville, including downtown, and the Brentwood-Williamson County submarket, which includes Franklin.
Vacancy ended the second quarter at just 4.9%, down 20 basis points for the period, down 160 year-over-year. Modest positive absorption took 10 additional points from the rate in July. Rent growth has been substantially positive since 2010 with effective rates increasing more rapidly, on average, than asking prices. At $782 and $740 per month, asking and effective averages for the quarter were up 1.3% and 1.5% from the quarter before and were up 1.7% and 2.2% year-to-date, following similar gains calculated for all of 2011.
With demand maintaining its lead over new supply, vacancy is projected to close 2012 at 4.4%. Rising supply totals thereafter should stabilize the rate, but at levels close to 4.0%. Gains of 3.6% and 4.6% are forecast for the mean asking and effective rents for 2012 all told. Similar growth rates should follow. The progress of the luxury high-rise in The Gulch bears watching.