Development Pullback Eases Pressure as Multifamily Vacancy Begins to Decline in Nashville

The pace of multifamily deliveries in Nashville is steadily declining from peak levels of 2023 and 2024. Completions year to date have totaled approximately 4,700 units, a figure that is down from prior periods but still elevated compared to historical averages. Developers are scaling back construction starts and focusing on leasing recently delivered projects. With the primary emphasis on maintaining occupancies, rents have remained essentially flat, although the market recorded a modest uptick during the second quarter. The recent rent increase coincided with a quarterly vacancy improvement, which was supported by stronger renter demand in key urban and suburban areas where absorption outpaced new supply. This sets the stage for continued rent growth and declining vacancy in the second half of 2025.

Investor sentiment in the Nashville area remains cautious but optimistic. Transaction activity in the first half of the year was steady, with the number of deals nearly identical to the same period in 2024. While the number of properties changing hands closely tracked 2024 levels, transaction volume spiked by nearly 70%, driven by an increase in institutional deals and a few large transactions. Investors continue to show a preference for newer vintage Class A and Class B properties. Nearly 70% of properties traded year to date were built in 2020 or later, while the remainder involved assets constructed in the 1960s and 1980s. The year-to-date median sale price for transactions involving properties with 50 or more units is $220,670 per unit, up 1% from the 2024 figure.

Looking ahead

Developers are expected to complete approximately 9,000 units in 2025, down from peak volumes recorded in recent years. The combined forces of elevated renter demand for units and slowing inventory growth are expected to support a decline in vacancy rates. Vacancies are on pace to fall below 8.0% by year-end and continue trending toward historical norms by late 2026. Tightening conditions should also support rent growth; rents are forecast to reach $1,730 per month on average. Market fundamentals are expected to continue to be supported by Nashville’s ability to draw residents and employers with its attractive music/entertainment culture and business friendly environment, especially among the healthcare, technology, and hospitality sectors.

Multifamily sales activity in Nashville may accelerate through the remainder of 2025. Investment volumes lag peak activity levels of 2021 and 2022, although pricing has stayed elevated. In recent months, investors have targeted newer construction projects, resulting in increases in per-unit pricing and a surge in sales of properties priced above $50 million. Cap rates have begun to compress slightly, signaling continued buyer interest as operating fundamentals improve. A meaningful rebound in sales activity may depend on interest rate cuts anticipated for the second half of 2025. In the meantime, trades will likely remain concentrated in well-located, newer vintage Class A and Class B assets that have reached stabilization.

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