Decline in unemployment and boom in the real estate market
Middle Tennessee’s economy is recovering so rapidly that its biggest problem may be caused by its greatest triumph – unhindered growth.
Dozens of cranes fill the skyline and unemployment is falling rapidly from record pandemic highs as the commercial real estate market explodes, according to Colliers Index Nashville, a leading regional analysis of the overall performance of the economy.
Tens of thousands of new jobs are underway, fueled by the region’s growing popularity with large corporations and relocations to major cities.
“The data shows that we have survived the storm of 2020 and the outlook remains incredibly bright for Nashville,” said Janet Sterchi, partner at Colliers International. “If the pandemic has taught us anything, it’s that people have a choice where they want to live. And Nashville is on the winning side.”
The strong and rapid recovery brought the region’s overall health back to 2019 levels in key areas, according to the index.
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But the surge in new business is hampered by a housing market with little supply and skyrocketing prices.
Home values in mid-Tennessee are up 14% from June 2020 and 1.9% from May 2021, according to Zillow. Rents increased nearly 9% year-on-year.
Rising costs will continue to exacerbate affordable housing shortages, analysts say.
“We’ve created so many jobs and attracted so many people that we don’t have enough housing for everyone,” said Rob McCabe, president of Pinnacle Financial Partners. “A lot of people could be left behind and a lot of jobs could go unfilled. This is our only red flag of warning.”
Jobs overtake homes
Californians, Chicagoans, New Yorkers and others have increased their interest in the greater Nashville area during the pandemic.
Employers, meanwhile, have followed talent with office relocations. Most notably, Amazon is preparing to fill its new downtown office tower and Oracle is building a $ 1.3 billion campus.
Nashville is second behind Austin for the fastest post-pandemic job growth among major subways, according to Katie Lester, research director of Colliers Nashville.
“We are ahead of the subways all over the United States,” Lester said. “This bodes very well for the Nashville commercial real estate market. It is an indicator of what is to come.”
But the construction of new housing is seriously behind schedule.
There were an average of 1.7 new jobs available for every new housing unit in Middle Tennessee over the decade ending 2019, according to a new study from the Manhattan Institute.
Since then, an influx of new, well-paying jobs has exacerbated the loss of affordable housing and continues to concentrate most of the wealth downtown.
“We recognize all the needs outside of the urban core to keep the city livable and accessible,” McCabe said. “The challenge we see is that the average salary for many of our new neighboring businesses is north of $ 100,000. That’s well above what most workers in Nashville earn on average.”
The still shy office market
The growth of local bank Pinnacle Financial Partners has followed the city’s rapid development, as the company helped fund much of it.
The bank has amassed over $ 35 billion in assets since its launch in 2000.
Pinnacle will be relocating from its original SoBro offices to a high-profile new corporate headquarters in the 18-acre Nashville Yards development between the Gulch and downtown.
McCabe said the decision was to stay in a central location while stepping away from the increasingly wild downtown parties. It will be adjacent to the campus two towers from Amazon.
But it is also preparing the company for an even more lucrative future.
“Nashville Yards is at the center of one of the most significant economic development projects in Tennessee history,” said McCabe. “We view COVID as a disruption, not a cyclical trend, which is rapidly diminishing. “
While Pinnacle employees are back in the office, many downtown employees are still working from home.
Analysts still don’t know how this trend will play out, although McCabe believes most local workers will be back in the office this fall. About 57% of downtown workers returned to their offices, according to Nashville Downtown Partnership.
“We are closely monitoring office vacancy rates, which have increased,” said McCabe. “I think the credit will be available for the office, although it may be more guarded until we see where this lands on working from home.”
Despite the challenges, Nashville is moving forward.
Commercial building permits, which hit a record $ 2.85 billion in 2020, are booming. According to Colliers, 47% more permits were issued in the first quarter of this year compared to the end of 2020.
You can reach Sandy Mazza by emailing [email protected], calling 615-726-5962 or on Twitter @SandyMazza.