| NASHVILLE INDUSTRIAL MARKET
At the mid-year point, 2.6 million square feet of industrial space in
Nashville had been completed. This keeps the local market ahead of last
year' pace, in which 4.5 million square feet of new industrial space
There is approximately 1.3 million square feet of industrial development
currently under construction, 770,000 square feet of which are bulk buildings.
These buildings should be completed by the fourth quarter. "Eighty-three
percent of all new construction has been bulk distribution buildings,"
says Ben Blakeley, research director for Colliers Turley Martin Tucker.
"We should see continued bulk development in the local industrial market.
Construction totals should approach last years totals."
Within the last year, Stiles Corp. and Panattoni Development have entered
the market and built a number of buildings. Panattoni Development' SouthPark
development off of Almaville Road in Smyrna continues to see a lot of
activity, especially for larger users in the market. Nissan, Graybar Electric
and Logisco have leased a combined 1.5 million square feet in the new
park. Panattoni has built three 500,000-square-foot cross-docked bulk
buildings and is currently building a fourth that will total 376,000 square
feet. These companies came to the area mostly to consolidate regional
distribution operations. Panattoni purchased an additional 38 acres adjacent
to the park for future construction. SouthPark will eventually total more
than 2 million square feet.
The majority of industrial development is taking place in the Southeast
market area, Blakeley says. By year-end 1999, the Southeast overtook the
industrial central business district (ICBD) as the largest market area
in terms of square-footage. Since 1998 the Southeast market area has added
over 5.7 million square feet to its inventory. Outside the ICBD, the Southeast
market has the largest critical mass of industrial space in the Nashville
MSA. The majority of development takes place in the Southeast market due
to the availability of industrially-zoned land, easy accessibility to
the interstates and the presence of a number of national manufacturers
such as Whirlpool, Nissan, Ingram and Hewlett-Packard. Hewlett Packard'
campus at Mid-South Logistec Center will eventually total 1.2 million
square feet. This area is also within close proximity to labor supply.
With Dell and Hewlett-Packard (HP) having major manufacturing operations
in the Nashville area, there has been a push to attract some high-tech
users and other computer-related suppliers associated with Dell and HP.
The major type of tenant the local market is trying to attract (and has
succeeded) to the area are large regional distribution operations that
would be drawn to the area by the three major interstate systems and the
area' quality of life. Nashville is within a day' drive of 60 percent
of the United State' population.
Rental rates for bulk product range from $3.10 to $3.30 per square foot.
Manufacturing facilities range from $2.75 to $3.05 per square foot. Business
centers range from $4.50 to $4.75 for warehouse and $10 to $11 for office.
The overall vacancy rate inched up slightly in the second quarter from
4.3 percent posted in the first quarter to the current rate of 4.7 percent.
"With a fair amount of construction still underway, we should expect to
see vacancy rates rise somewhat in the forseeable future, though not dramatically,"
notes Blakely. "However, strong leasing activity in the bulk sector helped
push down vacancy rates in the second quarter for bulk buildings." The
rate dropped from 7.4 percent posted in the first quarter of 2001 to the
current rate of 6.9 percent.
Blakeley says the area to keep an eye on is the Southeast market, which
will continue to grow at a strong rate as well as be the center of most
leasing and construction activity. Also, the East market area will be
a hot area now that speculative development has seen some success. Dell'
presence in Eastgate Business Park has sparked considerable interest and
development in the area. There are only 50 acres left that are available
for purchase in the entire park. First Industrial has built and leased
a 403,750-square-foot building down the street from Dell, and Stiles recently
leased its 235,000 square-foot building to Menlo Logistics. First Industrial
is currently underway with another 403,750-square-foot cross-docked bulk
Overall year-to-date net absorption for all product types is just over
800,000 square feet. However, the bulk market has seen occupancy levels
increase by 1.7 million square feet . Large vacancies in the warehouse
and manufacturing sectors have offset much of the growth in the bulk sector.
Ben Blakeley is research director for Colliers Turley Martin Tucker.
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