How are you feeling, as a real estate investor in Nashville?
These are interesting economic times, but the real estate market is hyper-local. Even as consumers across the country adapt to continued inflation, higher rents, and potential supply issues, the local economy in Nashville is strong. Not only is it strong, it’s growing. What does that mean for rental demand, rental values, and shifting tenant demands?
This city has long been celebrated for its vibrant music scene, rich cultural heritage, and southern hospitality. In recent years, however, the city has bloomed into something even bigger. It’s transformed into a high-potential economic powerhouse, attracting residents and investors from all over the world. For real estate investors and landlords, understanding the intricate relationship between Nashville’s booming economy and rising rental demand is crucial for making informed investment decisions and positioning their properties for success.
We can help with that. As experienced Nashville property management experts, we have seen the local market move through many economic cycles. We have helped sellers rent out their homes when no one was buying. We’ve worked with property owners and tenants during a pandemic, when evictions were halted but rent was sometimes slow to come in. We’ve helped landlords and investors navigate strong markets and soft markets.
There’s always a way to succeed.
Let’s look at the rising strength of Nashville’s economy, and what it means for rental property owners and tenants who are seeking homes.
Nashville’s Economic Surge: A Snapshot
Nashville’s economy has experienced remarkable growth, driven by several important features and factors:
- Population Growth. Since 2020, Nashville’s population has increased by 81,000, making it the eighth-fastest-growing metropolitan area in the U.S. This impressive influx of new residents includes over 31,000 new people in 2023 alone, indicating a sustained trend of migration to the city. Nashville is the place to be right now, and we expect it will stay that way for the near future.
- Job Creation. The city added more than 26,000 new jobs in 2023, surpassing its historical annual average. The unemployment rate stands at a low 2.7%, reflecting a robust job market that attracts professionals across various sectors. This is an important metric for real estate investors. As you no doubt know, choosing the right market for your next investment often depends on that market’s ability to attract workers and provide them with salaries that will support the local rents.
- Corporate Investments. Another reason that Nashville’s economy is thriving is that there’s a commitment from the corporate sector to invest in the city and its development. Major corporations like Oracle and Amazon have established significant presences in Nashville, bringing thousands of jobs and substantial investments to the region. Oracle’s new headquarters, for instance, is expected to add 8,500 jobs and contribute around $1 billion to the local economy.
This economic vitality has led to increased demand for housing, both for purchase and rental.
Rental Demand Dynamics in Nashville: Supply Meets Demand
The surge in population and employment has naturally escalated the demand for high-quality rental housing. The Nashville rental market’s response has been multifaceted:
- Increased Rental Inventory. To meet the growing demand, developers have accelerated construction of multifamily units across the city. In 2023, Nashville saw a significant uptick in apartment completions, leading to a more competitive rental market. As these new buildings come online, rental property owners need to understand the demands of tenants better and provide what they’re looking for in their next rental home.
- Moderating Rent Prices. Despite the influx of new residents, rent prices are stabilizing. After several years of steady and even sharp increases, the median rents have hit a plateau which is not entirely unexpected. Rents are still higher than most investors expected, and there’s no reason to believe that you’ll have to lower your rents to keep your property rented. This trend is attributed to the increased supply of rental units and the stabilization of the housing market post-pandemic.
- Shifts in Submarket Demand. While areas like Downtown Nashville have seen increased vacancies, neighborhoods such as East Nashville continue to experience strong demand. The unique character and amenities of these areas make them attractive to renters, even as overall market dynamics shift. Smart investors will look for opportunities to invest in developing neighborhoods throughout Nashville.
For landlords and investors, these trends underscore the importance of strategic property selection and pricing.
Implications for Real Estate Investors and Landlords
Understanding the interplay between Nashville’s economic growth and rental demand is essential for making informed investment decisions that impact current earnings and long-term ROI.
- Strategic Property Selection
Investors should focus on areas with sustained demand and potential for appreciation. Neighborhoods experiencing revitalization or those with unique cultural appeal, like East Nashville, may offer opportunities for higher returns.
- Pricing Strategies
With the stabilization of rent prices, landlords may need to adjust rental rates to remain competitive or offer incentives that will make higher rental values acceptable. Attracting tenants in a competitive market requires creativity and flexibility.
- Long-Term Investment Perspective
Despite short-term fluctuations in rental prices, Nashville’s long-term economic trajectory remains positive. Investors should consider holding properties for extended periods to capitalize on the city’s continued growth and development. Rents will start rising again, and property values are always appreciating in a market such as Nashville.
- Diversification of Investment Portfolio
Given the dynamic nature of the rental market, diversifying investment portfolios can mitigate risks. Exploring different property types, such as single-family homes, multifamily units, or short-term rentals, can provide balanced returns.
Remote Workers are Here, and They’re Looking for Rental Homes
Nashville has emerged as a prime destination for remote workers seeking a blend of vibrant culture, economic opportunity, and a high quality of life. This influx of professionals is not only transforming the city’s social fabric but also significantly impacting its rental market.
Why Nashville? Several factors contribute to this area’s growing appeal among remote workers:
- Cost of Living. Compared to other major metropolitan areas, Nashville offers a more affordable lifestyle without compromising on amenities. This affordability allows remote workers to enjoy a higher standard of living, even if they’re earning high salaries from companies in more expensive cities.
- No State Income Tax. Tennessee’s tax policy is a significant draw for professionals looking to maximize their earnings.
- Cultural and Recreational Opportunities. Nashville’s rich music scene, diverse culinary offerings, and recreational activities provide a balanced lifestyle for residents.
- Business-Friendly Environment. The city’s strong economy, bolstered by established and emerging industries like healthcare, technology, and logistics, offers ample employment opportunities for remote professionals and their families.
The rise of remote work has led to notable changes in housing preferences:
- Demand for Home Office Spaces. Remote workers prioritize homes with dedicated office spaces, soundproof rooms, and high-speed internet capabilities to support their work-from-home needs.
- Suburban Relocations. With the flexibility to work from anywhere, many professionals are moving to suburban areas like Franklin, Brentwood, and Nolensville, seeking larger properties and a quieter lifestyle.
- Luxury Market Growth. There is an increasing demand for high-end properties featuring home offices, smart home technology, and recreational amenities, as remote workers invest in homes that accommodate both work and leisure.
The influx of remote workers has had several effects on Nashville’s rental market, and smart investors are taking advantage of the positive impact. There’s an increased demand for rentals from this specific tenant demographic. The growing population of remote professionals has led to heightened competition for rental properties, particularly those offering desirable amenities. This trend has also caused property owners to consider more flexible leasing options. This is what remote workers are looking for, especially if they’re digital nomads with plans to move around every six months or so. Remote workers seeking flexibility are contributing to the growth of short-term rental markets, as they prefer temporary accommodations that offer amenities conducive to remote work.
Looking ahead, Nashville’s rental market is expected to continue evolving in response to the needs of remote workers. Here’s how:
- Development of Remote Work-Friendly Properties. Builders and developers are increasingly incorporating features like home offices and high-speed internet into new rental properties to cater to the remote workforce.
- Expansion of Co-Working Spaces. The demand for flexible workspaces is prompting the growth of co-working facilities, providing remote workers with professional environments outside their homes.
- Sustained Population Growth. As remote work remains prevalent, Nashville is likely to experience continued population growth, further influencing the dynamics of its rental market.
Remote work has a lot to do with Nashville’s new economy and the demand that’s arriving in its rental market. But it’s not only remote work that’s impacting the local economy. This is a growing city that’s attractive to qualified tenants because of its job prospects, attractive neighborhoods, high quality of life, and reasonable cost of living. All of this is reshaping its rental market, driving demand and increasing potential for investors.
Nashville’s growing economy has significantly influenced its rental market, and by staying informed about economic trends, understanding market dynamics, and adopting strategic investment approaches, you can navigate the evolving landscape and capitalize on Nashville’s growth. As the city continues to attract new residents and businesses, the demand for quality rental housing is likely to remain strong, offering promising prospects for real estate investment.
Let’s talk about what this means for you and your portfolio. Please contact us at Apex Ventures, Inc.
