Abstract
Nashville's industrial market is adjusting to an expanding development pipeline, with higher vacancy driven by new speculative supply. Despite negative quarterly absorption, leasing activity remains strong, rents continue to climb, and long-term demand is supported by economic resilience and sustained investment.
Nashville
ECONOMY
The economic tailwinds that emerged in early 2026 strengthened through Q2, supporting solid employment growth and sustained consumer spending despite ongoing geopolitical uncertainty and inflationary pressures.
Business investment remained concentrated in artificial intelligence and technology-related sectors, helping reinforce overall economic resilience. Looking ahead, continued economic expansion will depend heavily on the strength of artificial intelligence investment and its ability to support broader business activity and logistics demand.
Plans to construct a 70,000-square-foot (SF) data center near the Nashville Zoo faced heavy backlash. There are 12 existing data centers in the Nashville market now, several of which are larger projects. Amongst growing concerns, approximately ten Tennessee counties have passed or proposed moratoriums on data center development.
VACANCY
Nashville's vacancy rate increased to 5.2% in Q2 2026, representing a 40-basis-point (bp) increase quarter-over-quarter (QOQ) and a 190-bp increase year-over-year (YOY). This marks the fifth consecutive quarter of rising vacancy as new speculative supply continues to outpace tenant demand.
The East submarket accounted for the majority of the quarterly increase, with vacancy rising to 8.9%, a 240-bp increase from the previous quarter. The increase was largely driven by the delivery of two vacant Class A buildings totaling nearly 1.7 million square feet (M SF).
Almost all other submarkets recorded QOQ declines in vacancy. The Nashville Core posted the largest improvement, with vacancy declining 100 bps, followed by the Southeast, where vacancy decreased 20 bps, reflecting continued leasing activity and tenant absorption.
RENT
Average asking rents in the Nashville logistics market recorded an 8.9% QOQ increase and a 13.5% YOY increase, rising to $10.85 per square foot (/SF) in Q2 2026.
The rise in average asking rents was influenced by the delivery of more than 3.1M SF of new Class A inventory year-to-date (YTD), with premium pricing on newly completed buildings contributing to the rise in the overall market average.
Rent growth has been particularly pronounced in the North and Southeast submarkets. The North recorded the strongest appreciation in the market, with average asking rents increasing 15.9% QOQ and 42.3% YOY, while the Southeast posted a 25.2% YOY increase, supported by continued demand and the delivery of premium Class A inventory.
The Nashville Core continues to command the highest asking rents in the market, reaching $13.37/SF in Q2 2026, a 10.9% increase from the previous quarter and a 14.5% YOY increase.
DEMAND
The Nashville logistics market recorded 549,835 SF of negative net absorption in Q2 2026, bringing YTD net absorption to 207,187 SF. The North submarket led the market with 398,907 SF of positive net absorption during the quarter.
New industrial leasing activity in Nashville totaled over 4M SF YTD, exceeding new leasing activity in the first half of 2025 by over 1M SF. In addition, the market saw nearly 2.7M SF in renewals this quarter. Leasing activity was strongest in the Southeast, where more than 1.6M SF of new leases have been executed YTD, an increase of more than 300,000 SF YOY.
Several of the quarter's largest transactions were completed in the East submarket, where Under Armour renewed 1,083,543 SF and Geodis renewed 550,000 SF. In the Southeast, Quanta Manufacturing signed a new 518,667 SF lease.
While absorption was negative on a quarterly basis, the strong leasing activity seen in Q2 will boost positive absorption in the second half of 2026.
Investment sales activity remained strong during the quarter. Notable transactions included Strato Capital LLC's purchase of the 282,500 SF warehouse at 191–195 Polk Avenue for $30.35 million ($107.43/SF) and Stos Partners' acquisition of the 169,855 SF property at 640 Massman Drive for $25.93 million ($152.66/SF), both located in the Nashville Core submarket. Additionally, Tratt Properties LLC acquired a 1,614,421 SF Cookeville distribution facility leased to Academy Sports + Outdoors for $140 million ($86.72/SF).
CONSTRUCTION
Six projects delivered in Q2, adding a combined 1.9M SF to existing inventory. Northpark Logistics 1 (206,752 SF) was completed as a build-to-suit facility for Trane, while large projects like Earhart Logistics 2 (1,151,900 SF) and the Co-Op Business Park 2 (252,072 SF) delivered vacant.
Development activity remains concentrated in five of Nashville's seven submarkets: Nashville Core, Southeast, North, Montgomery, and East. The East continues to lead the market with 2.6M SF under construction, while the Southeast has the largest number of active developments, with 10 projects totaling over 1.3M SF.
The Nashville development pipeline expanded to more than 7M SF under construction in Q2 2026, driven by 19 project starts totaling more than 3.5M SF in Q2. This represents a 57.4% YOY increase in product under construction.
Several large-scale business parks continue to support the market's development pipeline, with future phases at Cornerstone Business Park, The Co-Op Business Park, and Northpark Logistics expected to help sustain construction activity as additional buildings break ground.
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