Nashville’s growth surges into 2024 despite transit failures and slow U.S. economy

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November 21, 2023 at 6:08 AM

Whatever your take on Nashville’s meteoric rise among U.S. cities, its reputation continues to thrive.

In fact, after years of breakneck growth, Music City’s future seems brighter than ever. Nashville commands the top spot as the nation’s all-around best market to invest in for the third consecutive year, according to a leading real estate industry report released in November by Urban Land Institute and PwC. The report, “Emerging Trends in Real Estate 2024,” highlights the diversity and strength of the Nashville region’s business environment.

Nashville is the first city to be named a top market for three years in a row in the report’s 45-year history.

But industry leaders agree that looming clouds on the horizon such as poor transit systems and cumbersome Metro permitting processes, as well persistently high interest rates and major global conflicts, dampen the overall outlook for investors.

Mayor Freddie O’Connell said he’s not dwelling on the accolades but rather how to spread the prosperity across as many households as possible.

Construction cranes crowd the Nashville skyline as more development continues downtown.Construction cranes crowd the Nashville skyline as more development continues downtown.
Construction cranes crowd the Nashville skyline as more development continues downtown.

O’Connell said Metro must not only master its development partnerships but also must spread the wealth countywide.

“We know we have incredible opportunities that are going to keep us a place to be a magnet for this attention,” O’Connell added. “As we go forward, we have to think about how all this opportunity is connected to Nashville’s needs and the concerns of our residents.”

The ranking reflects stability across Middle Tennessee’s industry sectors, and in downtown Nashville’s continued ability to lure massive crowds. Suburban growth is also a strong point continuing to fuel high population and job growth.

After Nashville, the top ten markets with the best prospects, according to the Emerging Trends in Real Estate report, are Phoenix, Dallas/Ft. Worth, Atlanta, Austin, San Diego, Boston, San Antonio, Raleigh/Durham and Seattle.

Major private-public developments underway in Nashville’s urban core sweeten its future prospects. A new $2.1 billion NFL stadium is underway, surrounded by a 300-acre redevelopment area anchored by new mixed-use development on downtown’s riverfront, including a 65-acre Oracle Corp. headquarters campus with a pedestrian bridge to downtown.

In Antioch, Metro is also heavily invested in the redevelopment of the former Global Mall at the Crossings site. These projects would also include meaningful investments in affordable housing and transit hubs, according to Metro plans.

Colliers Nashville CEO Janet Miller said the challenges are clear, but she’s hopeful Nashville will rise to the challenge.

“Deals are taking a lot more time and they’re falling apart at the end,” Miller said. “But I do believe there’s still optimism in this town. There’s still great energy.”

Even as the region barrels into 2024 outperforming competing cities, industry leaders heap caution on projections of future success.

“We are expecting a reset in the real estate industry — a reset and not a recession” said Haley Anderson, director of financial markets and real estate for PwC. “There’s a lot of waiting going on, and we do think there is going to be a recalibration in 2024.”

The Great Reset

The bottom line is rent growth, property values and investment returns will be lower than they were in recent boom years.

Banks have tightened lending standards and interest rates are expected to remain elevated through 2024 with persistent inflation.

It’s a hard environment to make deals for new commercial development. Only those with flexibility, a creative approach and good relationships will succeed, industry experts said.

AJ Capital Partners CEO Ben Weprin said the economic crosswinds feel like working outside during a hurricane.

“It is a really challenging environment no matter where you are, even in Nashville,” Weprin said. “Housing is completely stagnant right now. Most people are locked into their mortgage rates. There are loans out there, but they are so expensive. The deals don’t pencil out. It’s a grind.”

The Emerging Trends report dubbed this era the “Great Reset” because investors will likely lower their expectations during this longer-than-expected sluggish period.

Developers will have to reconsider which assets to prioritize.

“You want to mitigate risk and it’s all about who you know,” said Caroleen Wilkes, vice president of development at Wood Partners. “Nashville is still very much a better market to be in than other markets. There’s still demand for housing and lots of job growth.”

‘Everybody wants to do deals’

In this great reset, once-overlooked deals have suddenly become much more attractive, such as data and industrial centers, senior and lower-cost housing developments and creative reuse of older office and industrial properties.

Nashville investors are concerned the multifamily-apartment market is overbuilt with so much new supply built in recent years. But it’s still expected to lead all sectors next year.

Anderson suggested Nashville retool its restrictive permitting and zoning processes to remove obstacles.

“Everybody wants to do deals, so having an activity like the East Bank going on when there is a reset happening is a great opportunity. When things start to turn around, you’re going to have this great development ready to go,” Anderson said. “Really successful cities are creative in the ways they manage zoning and permitting. That is something that should continue to be top of mind.”

Adaptive reuse projects — creative redevelopments of old, blighted buildings — will be critical to revitalizing out-of-date offices.

DPR Construction, a builder in the Middle Tennessee market for a decade, uses laser scanners and complex virtual visualizations to tailor designs around existing facilities.

The software brings key advantages in this market, as work-from-home policies and a focus on workplace amenities has caused demand for old office space to plummet.

Among DPR’s current construction projects is a historic honky-tonk building at 405 Broadway.

“We’re working in 100-plus-year-old settings by using modern technology, laser scanning and virtual-design construction to be very precise about what we can and can’t do in those spaces,” said John Vardaman, DPR Construction Nashville business unit leader. “There’s a push for higher quality builders. There are a lot of technical challenges to renovating old offices.”

Transit is key to Nashville’s future

Experts said ongoing success in Nashville’s economy is contingent on improvements in bike lanes, rapid bus transit, park-and-ride lots and other ways to move residents and visitors.

“If we don’t do transit now, we’re going to miss a huge opportunity,” Wilkes said. “People have to have a way to walk and bike and catch a bus. When we look at peer cities like Austin and Raleigh, friends say the quality of life is better than what Nashville is becoming.

“I’m just talking about filling in sidewalks, having safe bike lanes and there should be a bus going from the airport to downtown.”

Plans for an airport-to-downtown train are already in the works. A train platform was installed as part of Nashville International Airport terminal redevelopment.

O’Connell said he is committed to prioritizing transit solutions during his term and delivering solutions.

“Despite magnificent performance of our overall economy and the sectors that drive some of that growth, we are still lagging behind our peer cities in terms of how we move around,” O’Connell said. “We are fairing poorly on our transit, walk and bike scores. We need to build an actual transit system.”

Sandy Mazza can be reached via email at, by calling 615-726-5962, or on Twitter @SandyMazza.

This article originally appeared on Nashville Tennessean: Nashville’s growth surges into 2024 despite transit failures