MARKET SNAPSHOT
Despite a projected decline in new unit completions this year, Nashville continues to rank among the nation’s top markets for units under construction relative to existing inventory. Currently, 13,300 units are underway, accounting for approximately 7.3% of the market’s existing inventory—trailing only Miami, FL (12.6%), Charlotte, NC (10.4%), and Raleigh, NC (7.6%). However, development activity has slowed in response to rising financing costs and market softening following a significant influx of supply over the past four years.
A key indicator of future supply, construction starts have seen a sharp decline from a record high of 15,400 units in 2022 to just 6,200 units in 2024 and aligning with pre-pandemic levels observed between 2014 and 2019. Additionally, the total number of units under construction has decreased by 6,700 year-over-year as of December 31, 2024, reflecting a notable shift in market dynamics.
In the more immediate term, new completions are expected to decline by 41% in 2025, with an estimated 7,169 units slated for delivery—significantly lower than the more than 12,000 units delivered annually in both 2022 and 2023. Overall, the slowdown in development activity across the Nashville multifamily market is expected to provide relief to property owners and operators, allowing for a reduction in concessions and a renewed ability to push rents upward. Nashville’s robust economic growth and attractive lifestyle amenities continue to draw businesses and new residents, reinforcing the market’s capacity to absorb the record number of units delivered throughout the current cycle.
Despite a record-breaking year for net absorption, with nearly 11,000 units leased—surpassing the previous high of 10,400 units in 2021—Nashville’s substantial supply additions in recent years have continued to place downward pressure on stabilized occupancy rates. Since peaking at 95.7% in Q1 2021, occupancy has declined by 340 basis points, reaching 92.3% by the end of Q4 2024. However, with construction activity expected to slow in 2025 compared to the previous two years, occupancy levels are projected to stabilize, provided that demand remains consistent with last year’s robust levels.
The majority of Nashville’s new supply continues to target the high-end segment, where demand has remained strong, with 8,300 Class A units absorbed over the past year. Despite this steady leasing activity, absorption has not been sufficient to fully offset the volume of new inventory entering the market. In 2024, more than 75% of total demand was concentrated within the high-end segment, while the mid- and lower-priced segments collectively absorbed approximately 2,500 units. On a submarket level, Downtown Nashville and Southeast Nashville led in net absorption, accounting for a combined 4,800 units.
Looking ahead to 2025, new completions are once again expected to outpace net absorption; however, the gap is narrowing, signaling a gradual return to market equilibrium. As a result, occupancy levels are projected to decline only slightly, with the overall average occupancy rate anticipated to dip by just 20 basis points to 92.1% by year-end.
As of the fourth quarter of 2024, Nashville’s multifamily market has experienced seven consecutive quarters of negative annual rent growth, driven by elevated levels of development activity. The addition of more than 25,000 units over the past two years has provided renters with an abundance of choices, particularly in high-supply areas such as Downtown Nashville and Southeast Nashville. These submarkets have seen the highest concession usage, with operators increasingly relying on rent reductions to attract tenants. However, as the pace of new deliveries began to slow in 2024— with 69% of new units completed in the first half of the year, the severity of annual rent declines moderated. By the end of the fourth quarter of 2024, effective rents posted a modest annual decline of 30 basis points, a significant improvement from the 2.7% rent cuts recorded in the fourth quarter of 2023.
Looking ahead, while Nashville multifamily owners and operators will continue to face an elevated pipeline in 2025, the lower pace of new completions is expected to bring greater balance between net absorption and supply. This shift is anticipated to support a return to positive rent growth by the second half of the year, with annual rents projected to rise by 2.1% by the fourth quarter of 2025. As supply pressures ease, rental growth is expected to stabilize further in 2026, approaching the pre-pandemic historical average of 3.3% observed between 2014 and 2019.
12-month period ending November 2024
Nashville’s multifamily market is poised for a gradual stabilization in 2025 as the pace of new deliveries slows and demand remains steady. While the influx of supply over the past several years has placed downward pressure on occupancy rates and rent growth, the market is showing signs of recalibration. The development pipeline is expected to moderate, with new completions forecasted to decline by 41% compared to previous years. This reduced supply influx, coupled with Nashville’s strong economic fundamentals and continued in-migration, should help rebalance market conditions and support a return to rental growth in the second half of the year. Effective rents are projected to increase by 2.1% by the end of 2025, with further stabilization anticipated in 2026 as demand continues to align with new supply.
However, challenges remain, particularly if demand unexpectedly declines due to unforeseen economic turbulence in the country. In the absence of such disruptions, Nashville rental demand is projected to remain robust in 2025, albeit at a slightly lower level than the record absorption seen in 2024. Despite strong leasing activity, absorption struggled to keep pace with supply last year, and new completions are expected to once again outpace net absorption in 2025. Additionally, lingering vacancies from recently delivered units are likely to place modest pressure on occupancy rates, which are projected to decline by 20 basis points to 92.1% by year-end. Submarkets such as Downtown Nashville and Southeast Nashville, which have been at the forefront of recent absorption activity, will likely continue to experience leasing momentum. Meanwhile, operators are expected to gradually scale back concessions as market fundamentals improve, allowing for a more balanced and sustainable growth trajectory in the years ahead.
