Why Millennials Are Flocking to Nashville

NASHVILLE—The big story for Nashville's growth has been multifamily. Employment gains and new entertainment attractions are luring Millennials to the southern city, which is driving multifamily demand.

For the past five years, Marcus & Millichap reports in its Nashville, 2015 Outlook, the metro has generated an average of 25,000 jobs annually. That has expanded employment more than 3%, far surpassing the national average. The firm predicts the creation of high-quality jobs will continue to draw top talent and young professionals to the metro.

“Substantial supply additions will persist this year, which will put slight upward pressure on vacancy in the near term,” MMI reports. “Despite the uptick, the vacancy rate will remain below 5% as net absorption exceeds 3,000 units for a third consecutive year. While conditions remain tight, operators will achieve another year of respectable rent growth.”

G. Ronald Witten, president of Witten Advisors LLC, pointed out Nashville as an early leader in the Southeast's multifamily landscape at NMHC's Apartment Strategies Outlook, and predicted that the early start would lead to a lag behind other Southeast markets this year: “2015 is another good year for the Southeast, with 3% to 4% rent growth expected, except in Nashville.”

MMI and Witten aren't the only ones seeing these trends. Development in Nashville's urban center is bringing employers and employees together in a vibrant environment, according to PricewaterhouseCoopers' Emerging Trends in Real Estate 2015 report. The firm says Nashville is attractive to the Millennials due to its postsecondary education system and entertainment district. At the same time, a low cost of doing business is driving industrial diversity.

Historically, PwC reports, local owners and developers have dominated Nashville—but that looks to be changing as institutional investors have discovered the improving economy and opportunities offered by growth in the urban center and the increase in the city's industrial base.

“Local perceptions of the market are that the strength in the local economy will continue to drive investor demand in 2015,” PwC predicts. “The increasing interest in the market by national institutional investors will be supported by the strong local development community.”

Jonathan D. Miller, partner in Miller Ryan LLC and author of the TrendCzar blog for Forum sister organization GlobeSt.com, predicts Nashville will “enjoy population growth and investor interest” in 2015. He referred to Nashville as a “top tier, secondary market.”

On the office front, Google marked Nashville as one of its seven tech hubs, which MMI says will serve as a network to the region's startups to diversity and attract new tenants to the metro and lift office space demand. Banking services company UBS is investing over $36 million in a new downtown facility, leasing 90,000 square feet and creating 1,000 high-paying jobs, the firm reports.

“Nashville is an emerging technology hub in the US,” says Grant Clarke, vice president of selling services at ServiceSource, a cloud-based recurring revenue management solutions company. “Nashville's vibrant culture and entrepreneurial spirit are key ingredients to building a dynamic workforce.”