Nashville condo market - Depressed? (Bristol, Brentwood: rental market, lofts, condos)

[vivelafrance]

Originally Posted by mcredux

Nashville's urban core condo market has buried more people than the mafia.

The Gulch is a residential graveyard. Drive through the Gulch at 8pm on a weeknight and see how many of those condos are actually occupied -- not too many lights on in the windows. The Gulch = 60% vacant buildings on top of halfway decent restaurants.

This was true maybe 2 years ago but things have turned around.

As of September 2011 the Icon had 65 vacant units out of 419 (EDIT: just saw ariesjow's post that it's down to 48!)
The Terrazzo has 5 out of 117

I've also noticed that several units in the Icon and Terrazzo have been featured on HGTV's Interiors Inc show. The Gulch definitely still has a buzz about it and the new construction coming to the area seems to reinforce that!

[ariesjow]

Originally Posted by soulful

Sounds like urban condos may be a very bad investment in Nashville. Perhaps condos in some of the older, smaller complexes around Green Hills or off West End might be better choices?

No, it would actually be a smart time to invest in the Gulch if you can especially with the rumoured Northwestern Mutual "Atlantic Station" type development that may be coming about, the new building being planned at the Roundabout with the urban Publix, ElevenNorth almost complete, the Eakin/Rensler project in the pipeline, the MCC and SoBro projects coming to fruition, etc. In other words, the Gulch and environs are going to look completely different very soon and will only continue to grow. West End is probably a good bet as well.

This board is a nice resource for varied opinions about a city or neighborhood, but nothing takes the place of doing your own due diligence.

[vivelafrance]

Here's an article from last month's Nashville Business Journal about condos and the Gulch. The article says that they expect prices to go up soon.

Closing the chapter on Nashville?s condo boom - Nashville Business Journal

[mcredux]

Originally Posted by soulful

Sounds like urban condos may be a very bad investment in Nashville. Perhaps condos in some of the older, smaller complexes around Green Hills or off West End might be better choices?

If you’re buying for the sake of investment, then duplexes around the Vanderbilt area are your best bet. They provide low vacancy rates with good cash flows due to a variety of factors.

If you’re buying a residence/investment, then yes, I would still look at places other than Downtown/Gulch. For West End, condos beyond 31st Ave are currently in demand (as opposed to relying on hypothetical growth) and will continue to appeal a broad range of affluent buyers.

Originally Posted by ariesjow

I disagree with you here and your stats are way off. Trust me, there are plenty of people who want an urban experience in Nashville and our core has been incredibly underbuilt for decades. We just need adequate units. There are almost 3,000 apartments under construction or in the planning for the core of the city for this very reason. The problem is that many people are not buying any more since the the collapse. They are opting for apartments instead.

That said, the Gulch condo market is much, much less than 60% vacant. Velocity in the Gulch switched from condos to rental units and it's close to filled now. Rhythm at Music Row is sold out and those are condos. Last month, there were only 48 of the 418 units of Icon in the Gulch left. Terrazzo is also close to sold out.

Perhaps it's time to shed that jaded belief that Nashvillians are not interested in urban living?!?

It has little to do with the economy. Rather, the developers have completely missed the market. The people they thought were going to buy in haven’t bought in.

The 40+ empty nester crowd have avoided the area like the plague. So that basically leaves you with younger professionals couples, who for the most part, are buying older homes and remodeling, primarily around Sylvan Park, Belmont, Vanderbilt, and Melrose. The housing collapse hasn’t even phased the gentrification in these neighborhoods. In fact, through the downturn this process has only sped up. Meanwhile, at Broadway & 21st, there has been a giant water-filled crater for the past four years.

Is a 60% vacancy rate hyperbolic? Of course. But let's get real for a moment.

* Velocity was completed 4 years ago in "one of the hottest, up-and-coming" areas of Nashville.
* Best case scenario: vacancy rate is ~12%, roughly double of what is normal.
* A large number of recent buyers are investors, who may or may not have rented their units. Thus, the real vacancy rate is likely higher.

By any standard, that property has been a flop. Meanwhile, 30 year old units around Hillsborough Village rent within a month and at a roughly comparable price/sqft. In the Gulch, it has been four years and it's still struggling.

[ariesjow]

Initially, I think the developers missed the mark on the price points for the condo units around The Gulch and downtown. When the price points were corrected, these units were snatched up. Although I agree with you that these developments have to contend with homes in some of the nicer urban neighborhoods with amenities & charm like Hillsboro Village,12South, etc., there is still plenty of interest in The Gulch as people are snatching up the rentals rather quickly and the residential stock for sale is small now. There are always going to be the people who prefer the lifestyle, amenities and views afforded by condo/loft living as opposed to having a house. That's why developers are also building apartment buildings in the other areas you mentioned as well. I think flop would be an overstatement considering these condos are pretty much all sold at this point. I also don't consider an area buzzing with new developments U/C or planned in a down economy to be "struggling," but we can agree to disagree.

It's unclear how many of the condo units are used for investment as opposed to personal residences. But a fair number of people are already renting units in ICON and Terrazzo, so many of those investment units are not empty and are putting more bodies in The Gulch than there was a couple of years ago. This mean the area is getting to the critical mass needed for more retail (which follows the residential) and will only continue to reach this mass once 11North, Pine Street Flats, and the Eakin/Hensler rental units become available. More people are gravitating towards renting now and the urban residential market in thriving cities comparable to Nashville is experiencing a similar turn towards apartment development in the same up and coming neighborhoods where the condo booms were taking place 5 years ago.

West End Summitt (aka Lake Palmer) has stalled indefinitely because Palmer cannot land the office tenants needed for a project of that magnitude. I doubt he's even considering the condos initially proposed for that project any longer. The second tower would probably be solely a hotel if that project ever comes to fruition as a twin tower project. So that's a different beast entirely since it's contingent on the strength of the commercial real estate market in the core.

Originally Posted by mcredux

If you’re buying for the sake of investment, then duplexes around the Vanderbilt area are your best bet. They provide low vacancy rates with good cash flows due to a variety of factors.

I agree with you 100% here. You cannot beat the areas around Vandy & Belmont for investment property as the universities drive the stability. I just don't think The Gulch is the bad investment you're trying to paint it as either.

[soulful]

The Gulch sounds like a risky investment based on the amount of current inventory (and more on the way). Imagine if someone needed to sell in this environment?

West End/Green Hills seem much more stable and without the glut of new inventory.

[vivelafrance]

Originally Posted by soulful

The Gulch sounds like a risky investment based on the amount of current inventory (and more on the way). Imagine if someone needed to sell in this environment?

West End/Green Hills seem much more stable and without the glut of new inventory.

I don't think there are more condos on the way. It's mostly apartments. Read the link I posted.

Here are some quotes from the article:

"Now, experts predict nearly all the developer-owned units, built during the condo boom, will be off the market sometime this summer."

"Until the market changes and developers, banks and buyers are willing to take more risks, don’t expect to hear any condo project announcements."

"With demand for urban living on the rise and no new supply slated to hit the market, some real estate professionals expect condo prices to start to climb."

[N.Cal]

Originally Posted by ariesjow

Trust me, there are plenty of people who want an urban experience in Nashville

And there are more of us coming, especially from other cities where this is our norm.

[soulful]

vivelafrance. I just read the article and appreciate you sending it. I didn't realize that several hundred units had been converted to apartments to alleviate the condo glut. It does sound as if wise developers will hold off on building more condos in this market and "experts" are suggesting that the inventory should be all sold by this summer.

I presume there are many people sitting with units worth half what they paid in the Gulch. I guess that won't impact things too much going forward as they will have to be short sales or foreclosures.

[nashvols]

Originally Posted by mcredux

It has little to do with the economy. Rather, the developers have completely missed the market. The people they thought were going to buy in haven’t bought in.

You say this like the rest of the metro (and country) aren't struggling with the housing market.

The same is true for the million dollar spec houses sitting empty in Brentwood.


It is the economy.