Nashville rental market: Post-pandemic housing trends continue
The pendulum of the rental market in the greater Nashville area is swinging in the renter’s favor. Ever so little.
After months of population records at all-time highs, the average rent for a one-bedroom apartment is now $1,582, according to ApartmentData.com, which tracks prices in a dozen major cities across the Sun Belt. The Downtown Nashville Partnership found that rent is highest in Nashville’s urban core, at $2,382 for an average 811-square-foot apartment.
Over the past 12 months, rents have fallen about 0.8% in the Nashville area, making luxury brand owners more willing to offer discounts to new renters and other perks — up to four months of free rent.
“It’s a better step for someone to live in this place and be able to pay the full rent in the third, fourth or fifth month,” said Joel Sanders of Apartment Insiders.
A temporary glut of housing delivered in late 2022 and into 2023 is partly to blame for the lower rental price growth, said Bruce McElhenny of MRI Software’s ApartmentData.com. He also said renters are moving out of cities in favor of suburbs. In Middle Tennessee, residents are increasingly choosing to live in Gallatin, Spring Hill, La Verne and other thriving counties surrounding Nashville.
“What we’re seeing now is negative rent growth,” McElenney said.
Davidson County’s population declined 1.1% from April 1, 2020 to July 1, 2022, while surrounding counties continued to grow rapidly.
However, the rental market in downtown Nashville is still growing, with 6,000 new units under construction and more planned. The population of more than 16,000 residents is expected to grow to more than 40,000 in 2030, according to the Downtown Nashville Partnership.
Nashville near the top in new units
A recent report from RentCafe estimated that rental apartment construction in the United States from 2020 to 2022 produced 1.2 million new units. Nashville was near the front of the pack.
Two-thirds of newly built apartments are concentrated in 20 high-growth metro areas spread across the country. In terms of 2023 unit deliveries, Nashville ranks No. 15 out of 20 with 8,977 units expected to be completed this year alone.
Since 2020, the Nashville metro area has seen more than 21,000 new housing units unveiled, according to RentCafe estimates.
In 2020, 6,783 units were delivered.
In 2021, 7,067 apartments were opened.
In 2022, the total reached 7,398.
New apartments mean more competition for existing apartments and more options for renters.
The nationwide construction boom is not over yet. RentCafe estimates that another million units will be completed across the country before the end of 2025.
Low occupancy leads to significant concessions
Free rent is the most popular perk for landlords looking to fill units. McElhenny said occupancy rates this summer hovered around 91%, which he said is an indication that the market is in favor of renters.
Some apartments are offering weeks or even months of free rent in order to secure leases on some units, Apartment Insiders’ Sanders said.
Concessions always come with some kind of conditions. For example, the largest deals may only be available on specific floor plans or lease terms. But it can still make a difference for renters.
For example, Albion in the Gulch is offering two free months on select units. Queens, a mixed-use development in Wedgwood-Houston, is offering eight free weeks. 1200 Broadway is offering one month of free advertising on all units with 12- or 13-month leases.
The bottom line for landlords is to get the tenant to sign the lease as quickly as possible, Sanders explained. The vacancy comes at a high cost.
“You know what your loss is,” Sanders said. “You could sew up the wound a little. You know how much you had to give up to secure that lease.”
According to ApartmentData.com estimates, nearly one in four units in the city (24%) offer rental concessions, with the average cost falling by 6.6%.
The special offers are concentrated in category A or luxury housing. It’s estimated that 43% of Class A listings offer some sort of perk, with the average discount being just over two months free.
“Nashville residents are not interested in nickel-and-diming,” Sanders said. “With all this luxury product, people still want a good deal.”
“IMPROVING THEIR LIVES”: The demand for more space continues
The COVID-19 pandemic has transformed the U.S. housing market. But while some short-term effects have normalized in recent years, one trend remains, according to experts.
Renters and homeowners alike are turning to larger floor plans and more outdoor space. For some, this means moving further outside the city so you can make room for kids, pets, a home office, and more.
In fact, one of the fastest growing regional cities is Columbia, located a half-hour south of Franklin.
Average rents for a three-bedroom home in Colombia have risen more than 20% since July 2022, according to Jonas Bordo, CEO of Dwellsy, an online rental marketplace. The mid-sized Tennessee city ranks fourth on Dwellsy’s list of the fastest-growing three-bedroom family rental markets in the country.
Other cities rounding out the top four on that list include Anderson, Indiana; Lawton, Oklahoma; And Lynchburg, Virginia.
Bordeaux said this classification shows two trends working side by side. People choose to live away from the center of metro areas because they are able to work from home several days a week. They also want the benefits of living in a growing area that has city-like amenities while not sacrificing perks like large yards, bedrooms and good prices.
Consequently, demand for large rentals in small towns near regional centers continues.
“People are trying to improve their lives,” Bordeaux said. “They have long commutes, so they prefer to work from home. They realize they can get more space for the same amount of money.”