Nashville bucking regional trend of slack retail space
Population growth drives new projects and retrofits

by Brian Forrester
Nashville Business Journal
Sept. 26 - Oct. 2, 2003

For the past two years, the Nashville MSA has remained strong economically compared to national averages and that bodes well for continued retail growth, experts say. Nashville's retail vacancy rate of 6.3 percent remains low when compared to similar cities. Atlanta's retail vacancy is at 10.8 percent and Charlotte, N.C., is 8.5 percent. Retailers' demand to enter or expand in Nashville has been fueled by the area's population growth.

"Nashville has a very good image nationally," says David Baker, principal at Baker Storey McDonald Properties. "As long as the population continues to grow, so will retail."

The Nashville MSA currently has 1.3 million people and had a 2.5 percent growth rate from 1990 to 2000. From 2000 until 2003, growth has added another 1.5 percent to that number. Other parts of the metropolitan area have reported even faster-paced growth with Rutherford, Williamson and Wilson counties seeing nearly 4 percent annual growth since 2000.

Those figures outpace the rest of Tennessee and have created demand for regional and neighborhood centers in particular. Publix, Kroger and Wal-Mart Neighborhood Grocery stores are aggressively expanding in the Nashville area, says Baker. Publix is anchoring developments by Parker Grass Co. in Spring Hill and Smyrna and Kroger is anchoring a new $10 million retail center on Briley Parkway.

Large power centers continue to fill out in Hendersonville, Murfreesboro and Wilson County. Phoenix & Associates is building a multiple-anchor development on Thompson Lane in Murfreesboro, anchored by Bed Bath & Beyond and Tennessee newcomer Ross Dress For Less. Other new faces in retail also are searching for space. "We're working with three brand new retailers right now, and all are in excess of 25,000 square feet," says Bill Vaughan of Shopping Center Group of Tennessee.

Nashville has seen Ross Dress For Less, Driver's Way and Belk enter the market along with several fast casual restaurant concepts like Qdoba, Wing Basket and Baja Fresh. In Nashville, big box retailer Target Corp. continues to surface as a potential anchor at the struggling Bellevue Center.

While Nashville MSA's vacancy rate is at 6.3 percent, the amount of prime real estate continues to be scarce, Vaughan says. That factor fuels the need for more developments or retro-fitting existing space for new users. Strike and Spare took advantage of existing space when it retro-fitted a shuttered Kmart into a bowling lane on Charlotte Pike.

Another example is the former Watkins College of Art & Design that is being retrofitted for Staples on Powell Avenue near 100 Oaks Mall. Currently Staples has five stores in the Nashville area. "Retail is so location-sensitive that a retail center can be redone to accommodate a new user," says Baker, who provided site selection for Staples.

Nashville-area mall tenants are considering non-mall formats while big-box retailers are considering mall stores, says Vaughan. "There is a great number of tenants that are having a propensity to move out of malls and into lifestyle centers," he says.

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