Getahn Ward

USA TODAY NETWORK – Tennessee

Trends such as daily averages of 65 people moving to Nashville helped fuel demand for new apartments.

The nearly 15,000 units under construction, with another 10,000 yet to break ground, have some concerned about overbuilding.

Axiometrics' data shows the Nashville metro area's average monthly rent rose to a record $1,083 for February, which was below the national average of $1,250.

Figures from Axiometrics show Nashville ranking 11th among major Metro areas in annual effective rent growth.

In his recent search for a downtown living rental unit, Bob Schenerlein was offered a month's free rent at the Element Music Row high-rise luxury apartments nearing completion on Demonbreun Street.

"I was a little surprised, but thought that was a nice offer," said the biotech industry manager who ended up renting a condo at the Twelve Twelve tower in the Gulch, where he plans to move from Brentwood.

Had Schenerlein signed up within 48 hours of receiving a quote from Velocity in the Gulch apartments, he would've seen application and new resident administrative fees cut by 77 percent to $99.

Experts see the return of such perks to entice renters as a key indicator that the explosion of large apartment buildings around Nashville is catching up with the number of people who can afford to occupy them.

"It's a sign that the amount of new supply is beginning to meet the demand, and the market is cooling down some," said Woody McLaughlin, a member of the statistics committee of the Greater Nashville Apartment Association. "It's not as heated as it has been."

Eighty-two people move to the Nashville Metropolitan Statistical Area each day, according to U.S. Census Bureau, 2014 American Community Survey 1-Year Estimates. Additional data shows a net daily creation of 103 jobs, helping to fuel demand for new apartments. But with nearly 15,000 units under construction and another 10,000 yet to break ground, some trackers of the city's booming apartment market are concerned about overbuilding.

Concessions, which largely vanished during Nashville's recent boom years, reappeared in the winter, especially at new and developing communities, particularly higher-end apartments. Many are offering perks, such as Terra House apartments at Rolling Mill Hill, Acklen apartments near West End Avenue, 23Hundred at Berry Hill and Aspire Midtown on Charlotte Avenue in a downtown-West End area that's accounted for roughly half of construction marketwide.

"It's economics 101," said John Tirrill, managing director of Atlanta-based developer SWH Residential Partners, whose 194-unit Terra House project — which opened in December — is 24 percent leased. "In 2013 and 2014, there was more demand than supply. In 2015 we were pretty close to equilibrium, and now in 2016 we’ve got more supply than current demand. ... The market's gotten a little bit ahead of itself."

In addition to more apartments offering concessions, Tirrill is seeing banks become more conservative in considering lending for new apartment projects. He also predicts fewer apartment starts next year, suggesting that new construction has peaked amid rising costs, slower rent growth and excess supply.

"I think we're in a concessions market for at least the next 18 or 24 months," Tirrill said. "This is all the top end of the market ... where we’re all competing for people that can afford rents $1,500 a month and up."

Others, however, caution reading too much into the perks. Tom Curl, a senior vice president overseeing SunTrust Bank's commercial real estate line of business here, said move-in incentives and other concessions are more likely to be offered during the typically slower winter months for leasing.

He points to the latest figures from Dallas-based research firm Axiometrics showing Nashville ranking 11th among major Metro areas in annual effective rent growth, which is a key indicator of a healthy apartment market. Average rents here grew 6.4 percent year-over-year in February versus 4.1 percent nationwide, while average occupancy increased to 97.5 percent compared with the 94.7 percent national average.

Axiometrics' data shows the Nashville metro area's average monthly rent rose to a record $1,083 for February, which was below the national average of $1,250. In terms of concessions, area apartments offered $3.60 a month, or $43 a year, off rent versus $11.10 a month, or $133 a year, nationwide.

Curl cited the inventory of apartments coming online and the effect that could have on occupancy, as well as putting the brakes on still rising rental rates, as among factors that have lenders cautious. That makes location of a planned project even more important with prime, first-class locations given preference for financing over secondary locations where apartment units are less likely to lease as quickly.

Curl cited Germantown and Midtown among areas with specific concerns about potential overbuilding or that are seeing a lot of new supply.

Fred Kane, a land broker with Cushman & Wakefield Nashville, has seen a sharp decline from two or three calls a week to virtually none from apartment developers needing help with finding sites for downtown Nashville projects. However, he's seeing more interest in projects in the suburbs, including Franklin, Hendersonville, Mt. Juliet and areas outside of downtown Nashville's central business district.

"There's concern from the lender perspective that there's enough $2.50 a foot or $2,000-$2,500 monthly leasing rate, Class-A product in the market," Kane said. "Now they're looking for something that they can lease up for $1.60 to $1.75 a foot, or about $1,600 a month. And it's something outside of the downtown loop."

With parents and others often acting as co-signers for leases on many high-end apartments dotting Nashville's skyline, the remaining pool of such co-signers is another factor that could help determine leasing rates of newer projects. Without them, many units wouldn't be affordable for many wage earners across the region.

Local condo broker Grant Hammond also sees more would-be renters taking advantage of relatively lower interest rates and purchasing townhomes and other residential dwellings instead of renting.

"A lot of buyers that maybe would have become renters by choice are jumping on ownership," he said.

Kane said apartment developers often use concessions to build momentum for leasing new projects, adding that such perks aren't always a sign of weakness in the market.

"Sporadic leasing concessions are not unusual during periods of the year," added Russ Oldham, a senior vice president within real estate firm CBRE's investment properties multifamily group in Nashville. "I don't think it's any cause for concern."

Tony Giarratana, the developer behind Edge Midtown and other Midtown apartments, said new leases have been steady.

"Given the rate of newcomers to our city, we expect a strong leasing velocity through the summer," he said, adding that concessions are a way to encourage immediate occupancy, rather than allowing an apartment to sit stale.

More broadly, Giarratana sees new inventory helping to meet demand from job growth, including from corporate relocation.

"While there are a number of new units delivering to the downtown market over the next few months, we'll most certainly need the inventory to meet the long-term demand," he said.

This story was updated with additional information at 12:21 p.m. on Tuesday, March 21st.

Reach Getahn Ward at 615-726-5968 and on Twitter @getahn.

Record Nashville average monthly apartment rent

2015: $1,044

2014: $954

2013: $882

2012: $829

2011: $791

2010: $775

Source: Greater Nashville Apartment Association