Is Nashville’s Apartment Market Headed for Oversupply?

Nashville’s development pipeline is loaded with apartments, and weakening multifamily demand could spell trouble for the developers.

Nashville has more than 16,000 vacant apartment units, and that figure could drastically increase in the next couple of years, given that another 18,000 units are in the pipeline, the Nashville Business Journal reported, citing data from CoStar.

The multifamily vacancy rate in Nashville is nearing 11 percent, which is considerably higher than the national average, said Michael Cobb, CoStar Group’s Nashville director of market analytics.

“Last year saw 7,200 units absorbed. Let’s couple that figure with the arrival of another 9,000 units this year and another 8,000 units in 2025. Even if [absorption] continues at this rate, we’re still not going to get anywhere near being full,” Cobb told the outlet.

The Nashville area’s population grew by more than 35,600 in 2022, or 98 people per day, according to the Nashville Area Chamber of Commerce. Population growth, a key factor in apartment demand, is challenging to gauge, as the data lags behind by nine to 12 months, Cobb said.

Apartment managers typically strive for 85-90 percent occupancy within the first year, but the lease-up process is starting to slow, taking 15 to 18 months or longer due to increased options for renters. The surge in multifamily development led to a 2 percent decline in asking rents by the end of 2023, the most significant drop since 2009.

Despite record-high vacancies and declining rents, Cobb contends that Nashville’s multifamily market is not oversupplied, since developers plan for the long term. The influx of supply is expected to diminish by mid-year, while vacancies are projected to remain above historical norms.

“It continues to be a supply story. The unknown is what do the demographic growth factors look like in the coming months, quarters and years to ultimately steer the demand side of things,” Cobb told the outlet.

—Quinn Donoghue