Workers broke ground for a large mixed-use development at the corner of Interstate Highway 65 and McEwen in Cool Springs, Tenn., about 15 miles outside of Nashville.
Franklin Park is just a drop in the flood of new construction coming to the Nashville metropolitan area. Thousands of new apartments and several large office projects are in the works. But local experts seem confident that local market can handle the new construction—for now.
The 71 acres in Franklin Park will eventually include five class-A office buildings totaling 1.5 million sq. ft., plus 350 new luxury apartments. There will also be an 11-acre, $10 million park with a 600-seat amphitheater, boardwalks and more than three miles of walking paths. Construction has started on infrastructure for the property and the park. Work on the offices and apartments should start before the end of this year.
New construction like this presents some danger for the apartment market in Nashville. There are now more than 10,000 apartments under construction or in the planning stage in the metro area, according to Woody McLaughlin, chairman of Parthenon Properties and member of the statistics committee for the Greater Nashville Apartment Association.
“New apartments are filling up as quickly as they come to market, but that’s the front end of the 10,000,” says McLaughlin. About 4,000 apartments are expected to be completed in 2012, with another 4,000 coming in 2013. “It’s going to become more of a problem to keep up.”
However, the market has built up some strength. Currently just 4.6 percent of the apartments in the metro area were vacant in the third quarter, according to data firm Reis Inc. That’s the lowest level of vacancy in many years—down from a peak of 8 percent in 2009. Effective rents have grown accordingly, rising nearly 3.9 percent over the last year.
The office market is also strengthening throughout Nashville. Just 13.8 percent of the offices space Nashville was vacant in the third quarter, according to Reis. That makes Nashville the seventh strongest office market in the country measured by vacancy. So it’s not surprising the office projects like Franklin Park are going forward.
Nashville’s employment situation is strengthening, says McLaughlin. The city has a diverse employment base including health care, universities, state government and corporate offices. That’s especially true in the Cool Springs area, which got its start with the Cool Spring Galleria Mall, a regional mall west of the city serving the most affluent section of the Nashville area. The area has spread to both sides of Route I-65 and includes several luxury hotels, strip malls, business parks, office buildings, big box retailers, low-rise apartments, condominiums, restaurants and car dealerships. Major companies, including Nissan North America, MedSolutions and Healthways, have offices near the mall.
Here’s another good sign for developments under construction like Franklin Park: Nashville is running out of easily-to-develop sites, which will act as a checker on future new construction. In the future new development is likely to be infill development that re-uses an existing site or that needs to work around Nashville’s sometimes rocky terrain. In Cool Springs, local official have resisted apartment development in the past—another potential barrier to future development.