$1,644 2Q 2024
-1.6%
92.7% 2Q 2024
-60 BASIS POINTS
3,765 [YTD: 6,280]
4,698 [YTD: 7,950]
QUARTERLY DEMAND
QUARTERLY COMPLETIONS
Despite demand trailing new unit additions in the second quarter of 2024, the Nashville apartment market achieved a remarkable absorption of 3,765 units during this period. This figure represents the second-highest quarterly total in Nashville’s history since 2000, falling just short of the record 3,900 units absorbed in the second quarter of 2021. This quarter’s absorption rate significantly exceeded the projections made at the beginning of the year, marking an encouraging sign for the Nashville apartment market. However, sustained strong absorption will be necessary to keep pace with the elevated number of units scheduled to come online over the next four quarters.
The Nashville metro area currently has about 15,300 units under construction. This total has been declining as new construction starts have decreased. Due to the cost of borrowing capital essentially doubling over the past two years, fewer projects have been initiated. Consequently, approximately 4,000 units began construction in Nashville over the past 12 months. Although this slowdown won’t be felt immediately—since it will take a year or two for the current pipeline to be completed—the impact of this reduction in new starts may begin to manifest by late 2025.
Stabilized occupancy has continued its downward trend in Nashville, as the metro area experiences its largest supply wave in the past two decades. Over 12,000 units opened in the past year, marking the fifth consecutive quarter where the trailing four-quarter total exceeded that number. However, the pace of occupancy decline in stabilized assets is moderating, shrinking by just 60 basis points annually in the second quarter of 2024. Notably, stabilized occupancy improved on an annual basis in downtown Nashville, reaching 93.1%, an improvement of 110 basis points from one year ago. Despite this, the vast majority of Nashville submarkets experienced annual declines in their stabilized occupancy rates due to the pressure exerted by the influx of the aforementioned 12,000 new units last year.
Effective rents in Nashville declined on an annualized basis for the fifth consecutive quarter. This trend marks the first occurrence for the greater metropolitan area since 2009, driven by 15-year high vacancies that have eroded property managers’ pricing power. The arrival of more than 12,000 units in the past year has provided renters with a wide array of options. Rent declines were widespread, affecting 11 of the metro’s 16 submarkets. The rates of decline varied significantly, with Robertson County experiencing a 5.2% drop and Southeast Nashville seeing a decrease of just over 4%. Only two submarkets, the sparsely populated Outlying West and Outlying Northeast, saw effective rents grow by at least 1%. Notably, while asking rents in downtown Nashville declined by 0.9%, effective rents remained flat over the year. This stability is a positive sign for the submarket, which has absorbed the bulk of new deliveries in Nashville.
Average Monthly Mortgage Payment
Average Monthly Rent
As of the end of June 2024, the total value of individual conventional multifamily transactions in Nashville, TN, amounted to approximately $313.0 million, marking a 37% decline compared to the same period in the preceding year. The number of properties traded also declined by 2, with 13 assets changing hands in the first half of 2024. Institutional buyers, who averaged around 30% of apartment asset purchases between 2010 and 2023, have been notably absent from the market this year, contributing to the decline in transaction volume. Instead, private buyers have driven the investment market so far in 2024 due to their greater agility in getting deals done in the current environment. However, there are signs that institutional buyers are starting to re-enter the market. Both KKR and Blackstone made significant portfolio purchases in the first half of 2024, indicating a belief that the multifamily market may have bottomed out and is shifting towards an upswing cycle.
*Most Active Buyers and Sellers are based on the sale volume of apartment units.
* Trailing 4Q average PPU
* Preliminary Data from RCA – Individual transaction $2.5M +
|
Under 35 Years
|
35 to 44 Years
|
45 to 54 Years
|
55 to 64 Years
|
65 to 74 Years
|
75 to 84 Years
|
85 Years & over
|
|---|---|---|---|---|---|---|
|
0.5%
|
0.7%
|
-1.4%
|
-0.3%
|
0.4%
|
0.1%
|
0.0%
|
The 35-44 age group is the fastest expanding renter demographic in the Nashville metro area, showing a 0.7% growth from pre-pandemic 2019 to 2022. This suggests an increasing demand for rental housing that caters to a maturing millennial population.
Looking ahead, strong foundational demand drivers, coupled with a significant reduction in supply pressures by 2025, are expected to strengthen occupancies and subsequently accelerate rent growth. This shift is anticipated as the high influx of new residents continues to fuel demand, while the slowdown in new construction starts helps to rebalance the supply-demand imbalance. These conditions suggest a more favorable environment for the Nashville multifamily market in the medium term, leading to stronger rental yields as the market adjusts.
