How long will Nashville’s boom last? VUSE symposium seeks answer
The CEO of one of the nation’s largest construction management consulting firms said Thursday he’s bullish on the nation’s building boom lasting another 3-5 years, but probably not 10.
Hank Harris with FMI Corporation and Seth Butler, senior vice president and head of commercial real estate for Nashville-based Avenue Bank, were charged with answering the question “Nashville Outlook: How Long Will It Last?” Their presentation was part of the sixth annual Project Management Symposium held at Vanderbilt University School of Engineering.
But if the construction engineers, architects, contractors and others in the audience of 100 were looking for a crystal ball-style presentation full of specifics, they didn’t get one. Instead, Harris explained trends and influences affecting construction nationally, while Butler shared comparative data on Nashville’s residential and commercial real estate lending and development.
“Everyone always wants to know where interest rates are going,” Butler said. “Fed watchers say it’s going up in the next 12 months, but they’ve been saying that for the last 18 months.”
He hit on a common theme in Nashville development conversations: Housing stock isn’t keeping up with population growth. He said some employees who have moved here to work for Avenue Bank have ended up living with colleagues while searching for apartments.
Overall residential occupancy in the region in 2014 was 95.5 percent, he said, and there were 8,558 units under construction on Dec. 31, with their delivery representing a 7.5 percent increase in existing stock. At the same time, the area’s population is growing by 50,000 people per year.
Other points in Butler’s presentation included:
- There was a 7.5 percent vacancy in office space on March 31 of this year, compared to 10.6 percent at the same time last year.
- Music City Center is creating huge demand for more hotels, but banks aren’t sure how many rooms are enough when the business is based on night-by-night occupancy. “We’ve got four hotels on our balance sheet right now, and we probably can do two or three more,” Butler said. “Banks don’t want that to be a major part of their portfolios.”
- The industrial space vacancy rate was 6.5 percent and the end of the first quarter, compared to 12 percent in 2010. The market is seeing large spec buildings for the first time since 2007, including projects by Prologis and Panattoni.
Harris told the group that nationally, construction will return to pre-recession levels by 2017.
“The last couple of years have returned your volume, your backlog is good, but you haven’t seen a return of the margins,” Harris said. “You cannot have a healthy economy without this sector being healthy.”
Construction is a $1.2 trillion industry and represents 8 percent of the Gross Domestic Product, he said.
Harris also said a result of the recession was that top contractors gained a larger market share, because they began paying attention to the smaller projects that formerly may have gone to mid-range firms.
Other sessions in Thursday’s symposium covered the Ovation development in Williamson County, Tenn.; women in architecture, engineering and construction; Nashville’s Gulch; the Buckingham Midtown development in Nashville; and an analysis of the swing stage collapse at Chicago’s John Hancock Building.
Heidi Hall, 615-322-6614
On Twitter @VUEngineering