The overall office vacancy rate in Nashville is relatively low, and vacancy is well below 10 percent in Brentwood/Franklin and West End/Belle Meade; these submarkets enjoy accessible locations within the greater Nashville metropolitan area and boast established business communities, which allow them to command the highest average asking lease rates in the area. The Brentwood/Franklin submarket received a boost in early 2013 when RANDA Solutions moved into 26,000 square feet of office space in the submarket. Additionally, the West End/Belle Meade submarket was bolstered by The Advisory Board Company’s relocation into 19,000 square feet of office space. These two submarkets should enjoy continued growth, especially Brentwood/Franklin, which is expected to experience over 450,000 square feet of office space growth in 2014 as new headquarters for Tractor Supply Company and LifePoint Hospitals are completed.
The amount of available office space in Nashville has realized negligible growth over the past three years. Vacancy rates rose slightly in 2009 and 2010, but remain relatively low and below the prior peak in 2002; lease rates are likewise holding strong. Forecasts for Nashville’s office market reflect a resumption of construction and modest growth in available space, balanced by continuing demand increases.
Outlook on Hotel Market Occupancy and Average Rate
Nashville’s overall economic health has fortified the city’s lodging market. During the peak of the last market cycle (2006/07), strong performance across the market had brought many new hotel developments to the drawing board. Though financing for most froze up during the recession, hotel demand levels took only a minor hit in Nashville compared with other markets across the country. Occupancy levels at area hotels began to rise in 2010, and rates soon followed suit. Healthy demand continued in 2011, and overall demand levels reached new heights in 2012; average rate growth also continued through 2012.
The Nashville hotel market benefits from an extremely stable base of demand generated by its leisure, government, and commercial entities, providing strong occupancy in the mid-80s to high 90s on nearly every night of the week, especially Friday and Saturday, from February to October each year. The lack of recent hotel development and the continued expansion of the local demand base have increased the premium for existing hotels among both guests and investors.
Recent Hotel Transactions
In most of the recent hotel transactions the contracted prices per room were well above those for nearly every other area in the state. The most significant sale in terms of total price and price per room was the Hutton Hotel, which sold for $73.6 million. This 247-room, full-service property is located approximately one mile west of major attractions such as Bridgestone Arena and the Country Music Hall of Fame.