The Nashville multifamily market is one we watch closely for investment opportunities. Here’s an overview of how it did in the 3rd quarter of this year:
Apartment demand has stayed strong despite high delivery rates from new development. For the first time in over three years, more units were occupied than completed this quarter, reaching levels close to a 10-year high. This means “absorption” of new units is outpacing “delivery.”
Delivery of new units is decreasing but is still significant. Since peaking in late 2022, the number of units being built has dropped by half. However, this area still has one of the highest rates of new construction in the country.
Average rents have been going down because of the large number of new units available, with decreases seen in every quarter since early 2021. But Nashville’s future looks promising for apartment operators. Due to steady population growth, with nearly 175,000 new residents since 2020—a 9% increase—it is the eighth fastest-growing metro area in the U.S. Rising home prices have pushed many renters out of the housing market.
The current overall multifamily occupancy rate of 92.8% is expected to remain stable through 2024 before gradually increasing (recovering). The demand for rental units is crucial for this recovery, as absorption and deliveries are projected to stay balanced next year. Rent trends are also predicted to stabilize, with increases expected to begin in early 2025 and potentially reach around 4% annually by the end of the year.
At TownSquare Capital we typically invest with a 4-7-yr time horizon. So, long-term trends are more important than short-term metrics. We are very optimistic about the Nashville multifamily market going forward and look at the current market softness as a great time to buy. Reach out if you would like to learn about the specific properties we are evaluating in middle and east TN.
The information above is a summary of MMG’s Market Snapshot 3Q 2024. See the full report at https://mmgrea.com/nashville-3q-2024-market-report/
