January 16, 2021
By Matthew E. Kahn and Mac McComas | Research sponsored by Alex. Brown Realty, Inc.
Over time, some cities decline, and other cities grow. Among those that grow, some grow much faster than others. Those cities, and their surrounding regions, that experience above average growth often present very attractive markets for real estate investors. Those investors who identify markets with the potential for above average growth, especially sustained above average growth, are often rewarded with above average investment returns.
A city’s success depends on global and national trends as well as necessary and sufficient conditions at the local level for achieving growth. One city that has enjoyed remarkable success in recent decades is Nashville, Tennessee. This city, and the surrounding region, experienced 16% population growth over the past decade, compared to 6% on average for the entire U.S., making it the seventh fastest growing large Metropolitan Statistical Area (MSA). Job growth has been even more impressive. Over the past decade, employment in the Nashville MSA grew 26%, compared to 15% for the nation, making it the fifth fastest growing MSA. Real estate investors that anticipated these outsized growth rates and committed capital to the Nashville market typically enjoyed high levels of occupancy and asset appreciation.
Identifying the factors that contributed to the impressive growth of Nashville, and cities with similar results, can aid investors in market selection and may also provide city government and business leaders insights into opportunities to improve their own growth trajectory. This report is the first in a series that will explore the history of what made Nashville an economic success and will also look at more recent trends, highlighting those places that might enjoy similar success in the coming years.
In this report, we explore five factors that may have contributed to the city’s success: good governance, regional competition, a diversified economy, low cost of living and high wages, and the ability to attract young and educated people. We do not present these factors in a prioritized list or claim that they alone are the reason for the city’s success. Instead, we explore how they might have served as a draw for people and firms in recent decades.