Amid growth around the country, Nashville, TN has become one of the hottest development markets in the country. Demand for housing, hotels, and office buildings has created a flurry of development activity throughout Music City. In this and following articles, I will focus on the Nashville hotel market and how this rapidly growing landscape is affecting change throughout this dynamic city.
Market Update: The Nashville Hotel Market – Part One
Over the past few years, a new kind of bird began to show up in Nashville – the crane. While announcements of new construction projects became a weekly occurrence, slowly cranes began to dominate the Nashville skyline. While, at the same time and not entirely unique, various project trackers began to appear on Google searches of development in the city. The city of Nashville has a tool managed by the planning department which pinpoints every project that is proposed throughout the city, both commercial and residential. However, the Nashville Business Journal created a Crane Watch in an effort to help the public understand which commercial project is which. At last count, there are a total of 203 projects listed on crane watch. This list includes future projects, current projects under construction, and finished projects. It should be noted that 47 of the 203 projects listed on Crane Watch are hotels. That said there are currently 28 working cranes in Nashville, with more expected.
So, why all this focus on Nashville hotel development? What makes Nashville’s growth unique? Interestingly, Nashville does not have the largest hotel growth in the country. In fact according to the STR, Inc Pipeline Report, Nashville currently has around 3,521 hotel rooms under construction which represents a 12% increase in the total number of rooms coming into the market. This puts Nashville in 3rd place behind New York who is building around 15,000 rooms or 13% increase and Seattle with 5,416 rooms which is also a 13% increase. What does make Nashville unique in the amount of growth is in addition to a much smaller population level compared to New York City (8+ million) and Seattle (3.7 million), Nashville does not have a beach, mountains, a theme park, a major financial center, or other demand generators.
Currently the mix of projects is pretty evenly split with 55% of the hotel rooms in the Full Service category and 45% in the Limited Service arena. While not particularly surprising, the shift comes with the next round of hotels which are currently in the Final Planning phase. In the Final Planning phase, meaning hotels that have not yet broken ground or started construction, Limited Service properties represent 60% of the hotel rooms that could be coming to the city. Though not all of these properties will be located in the downtown core, there will be a significant number located there creating an abundance of supply in that market. In future articles I will explore the breakdown of a variety of property types and their impact on the Nashville hotel market.
Finally, as the hotel market in Nashville changes at break neck speed, many are left wondering how this supply will change the current landscape for existing hotels or what demand generators will materialize to keep hotels in Nashville operating at the current pace.
Next up on the Market Update - Nashville: The Big Kahunas - The New Convention Center Hotels