Help wanted

It’s always a challenge to decide which people to include in our annual Leaders magazine and its In Charge list.

There are simply too many folks doing important work in the city.

Many of Nashville’s most influential people are represented in these pages, but many are not — perhaps because we have not yet learned about their e orts.

This year, we are adding a new feature to the In Charge list to show how leaders in di erent industries deploy similar skillsets to push Nashville forward. You can find The Conveners (page 36), The Risers (page 40), The Builders (page 46), The Mentors (page 56) and The Givers (page 60) inside.

After years during which Nashville responded to a pandemic, a tornado, a bombing and floods, it seemed as if 2023 might just signal a return to “normal.” But on March 27, any hope for a peaceful spring was lost when a shooter entered the Covenant School in Green Hills and killed three children and three sta members: Evelyn Dieckhaus, Hallie Scruggs, William Kinney, Cynthia Peak, Mike Hill and Katherine Koonce. We’re depending on many of the people on the In Charge list, especially those in the Government/Politics section (page 37), to do something about it.

Stephen Elliott, Editor selliott@fwpublishing.com

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April 1, 2023

Dear Chamber Member,

In collaboration with our media partner, FW Publishing, I invite you to enjoy this complimentary issue of Nashville Post Magazine. We areexcited to offer this great benefit to youas a valued chamber member.

Thank you for your continued investment in the Nashville Area Chamber and your ongoing support of our mission, to create economic prosperity by facilitating community leadership.

Warm regards,

Ralph Schulz President and CEO Nashville Area Chamber of Commerce

THREE QUESTIONS Lisa Maki

Avison Young principal talks city’s commercial real estate scene

Lisa Maki is a principal at the Nashville o ce of Torontobased Avison Young. She teams with Mike Jacobs (also a principal with the firm) when undertaking transactions, and the two have worked in tandem for more than 10 years.

Maki, who focuses on Avison Young’s Nashville capital markets business unit, recently spoke with Post Managing Editor William Williams regarding the city’s commercial real estate sector.

What does Nashville’s current commercial real estate environment look like compared to the environments of the last five-to-10 years?

The market remains robust. But as it compares to the last five-to-10 years, we are beginning to see some caution. Since 2000, Nashville has grown by almost 1 million residents regionally. That growth continues to spur development on all fronts. Our city has remained at the top of investors’ target list for the last two consecutive years according to PWC and ULI, for 2021 and 2022.

Given the market disruptions across the globe right now, we are very fortunate to have a positive outlook for development including leasing and investment sales for the upcoming year. The last decade has put Nashville on the map as a global destination for both corporate and resident relocations.

Nashville has continued to experience a wave of demand for investment. That demand has driven numbers to unprecedented levels — especially when you look at the last five years. It’s a developer’s dream to have that kind of demand in such a short span of time. While housing demand outpaces supply, prices are starting to level out compared to the pricing frenzy we experienced over the last threeto-five years. Construction has slowed given market fundamentals and the uncertainty of rising interest rates and construction pricing. However, March sales have picked back up with sellers seeing multiple o ers again as buyers compete for the limited existing inventory. Since 2013, the o ce supply grew by almost 10.5 million square feet, the industrial sector by 37.25 million square feet, with retail supply at a slower pace by just over 7.3 million square feet. By 2024, the downtown submarket will have increased by over 16,000 multifamily units and the hospitality sector will more than triple its footprint with another 2,000 hotel rooms currently under construction.

With volatile construction costs and rising interest rates, structuring development deals will become a bit more complex. Investors will have to be more strategic approaching deals, and decisions will take longer than we have experienced in the last five years. Lenders will likely require more equity down on future opportunities, and transaction volume is predicted to slow in the months ahead. However, the Nashville market has been doing so well, there’s still a promising number of transactions occurring.

The pause Nashville will experience versus other areas in the country will likely be more favorable given the draw to our city. As we continue to attract corporate relocations, millions of tourists and residents, there is still an undersupply of adequate housing and commercial space to occupy the influx of companies and residents to this area. We are optimistic that Nashville will continue to see a healthy appetite from investors given the city’s diverse mix of economic drivers.

The last 10 years have brought many accolades: Nashville was ranked in 2022 No. 4 among U.S. cities for people looking to relocate, according to Zillow and Allied Van Lines. LaborIQ named Nashville as one of the five best performing U.S. labor markets, and Policom ranked it in the top five metro areas for economic strength.

How does the local CRE sector compare to those sectors in peer markets such as Charlotte, Raleigh and Austin? If an investor is looking at Nashville, more than likely they are looking at Charlotte, Raleigh and Austin. The market fundamentals and geographic locations all seem to align in these markets. With job growth and population growth being essential to how developers look at demand, each of these markets remain strong. However, if you look at overall appeal to tourists and residents, Nashville is likely the favorite. Of course, that is just my opinion that I may share with several other millions of people that visit or move to Nashville annually.

In comparing the o ce investment sales market in 2022 for each, Austin beat Nashville and Charlotte with a total sales volume at $1.6 billion, with an average price per square foot of $483, indicating Austin o ce values holding steady for now. However, the bulk of transactions occurred in the first half of the year. By end of October, capital markets screeched to a halt with a handful of transactions occurring in November or December.

Charlotte was the runner-up with approximately $1.3 billion in o ce transactions, down 46 percent from total volume in 2021, with Nashville at $1 billion in sales, which was a new record high, up 45 percent year over year. Where Raleigh sales volume actually decreased, the sales price per square foot has increased by almost 15 percent from its former high in the fourth quarter of 2021.

The Nashville industrial market witnessed substantial investment interest during 2022 at $1.2 billion in transactions. This year presented a record-high sales total due in part to numerous portfolio sales trading throughout the year. Pricing for industrial assets continues to trend up, with infill properties trading at premium values.

As a premier industrial hub for the Southeast, Charlotte’s industrial sales in Q4 2022 held approximately $400 million in transactions, up 54.3 percent from the figure of the last quarter with total sales exceeding $1.2 billion for the year. However, private investor activity slowed as a result of the increased cost to borrow money, while institutional capital is still being deployed and industrial assets break record valuation figures.

Sales volume for Raleigh industrial sales has remained strong since 2019, while sales prices per square foot have increased 45.6 percent during the same period. Due to high demand, it is likely that the market will continue to experience high sales volume and rising sales prices in 2023.

Austin remains strong with a demand from e-commerce and tech manufacturing that, along with new supply additions, have continued to place upward pressure on rental rates. Asking rents have grown by 7.7 percent year over year and are up by more than 26.9 percent over the past five years. Industrial property sales price per square foot continued its upward climb to an all-time high while industrial sales activity volume only slightly increased to $487 million for 2022.

How has COVID-19 a ected CRE deal flow? COVID actually escalated deal flow in the Nashville area on the investment side of things. However, it certainly made an impact on corporate relocations and the o ce market, which is still trying to sort out how best to predict o ce use with a new work-from-home policy or a hybrid model for users.

Since COVID, o ce leases have begun to shrink on a square foot basis (tenants are becoming more e cient in their o ce footprints). As well, deals are taking longer and tenants are reviewing options and/or needing more approvals. COVID may have spurred this but there are many other factors such as our current global economy, interest rates, etc., that have impacted this as well. Rising vacancies and record levels of sublease space are beginning to level out rents on a market level, but Class A and new construction really hasn’t had as much of an impact.

If you look at total sale volume since COVID began, you will find that Nashville soared in deal trades across most sectors during the last few years. The fourth quarter of 2022 certainly indicated there was a pause in the market as will the first quarter of 2023. With that said, investors are not pausing because they do not have equity. They have plenty of equity. The pause comes from the many uncertainties across the globe today. Rising interest rates, the cost of development, geopolitical concerns and the new requirements for higher bank reserves will limit debt funding for the near future. In fact, many speculate that deals will get done over the next 12 to 18 months. But instead of debt, investors will use more equity to fund deals and in some cases may even use equity to fund the debt on deals. This could potentially become a new avenue for structuring deals over the next few years until inflation and interest rates remain steady and investors get more comfortable with the new capital markets landscape.