Ground-up construction offers real estate investors the chance to create custom residential properties from scratch, giving full control over design, layout, and features.
In Tennessee, steady population growth, a significant housing shortage, and a strong construction sector are fueling demand for new builds.
This guide explains what ground-up construction is, how it works in Tennessee, cost considerations, and where the most promising markets are located.
Start your application with Park Place FinanceWhat is ground up construction?
Ground-up construction is the process of building a property on undeveloped land or a cleared lot, starting from the foundation and working up to a finished, move-in-ready home.
This approach differs from renovation or redevelopment, which focuses on modifying existing structures.
The process typically includes:
- Land preparation: Clearing, grading, and utility installation
- Foundation work: Laying the structural base
- Framing and construction: Building walls, roofing, and core systems
- Finishing: Interior, exterior, and landscaping
This approach gives developers total design control and allows for modern layouts, energy efficiency, and compliance with the latest building codes.
It also allows for integration of smart-home technology, sustainable building materials, and ADA-compliant features from the outset.
Why ground up construction is booming in Tennessee
Let’s look at the main drivers behind Tennessee’s surge in new construction projects, from demographic changes to economic factors:
1. Population growth and housing shortage
Tennessee’s population has grown steadily in recent years, adding tens of thousands of new residents annually, driven largely by people moving in from other states.
The state faces an estimated housing shortage of around 120,000 units, creating urgent demand for new residential projects.
2. Economic expansion
The construction sector contributes about $18 billion annually to Tennessee’s economy, or roughly 3.6% of state GDP.
The state also ranks 9th in the nation for commercial construction spending, with over $14 billion invested in 2023—an increase of 103.5% over the past five years.
3. Favorable business climate
Low taxes, pro-development policies, and infrastructure investments make Tennessee attractive for builders and investors.
Tennessee’s right-to-work status and streamlined permitting in many municipalities also reduce barriers to entry.
4. Diverse market opportunities
From high-rise apartments in Nashville to large-scale subdivisions in suburban counties, developers can choose from a variety of profitable project types.
Tourism markets like Gatlinburg and Pigeon Forge are also seeing a rise in custom cabin and resort-style ground-up projects.
Popular areas for ground up construction in Tennessee
If you’re considering where to invest or build, Tennessee offers multiple markets with strong demand and unique opportunities.
Here’s an overview of key hotspots across the state.
Nashville Metro
- Hotspots: East Nashville, Germantown, The Gulch, Midtown.
- Projects: Luxury condos and townhomes.
Murfreesboro
- Issued over 2,000 residential building permits in 2024.
- Strong demand for both single-family and multifamily projects.
- Attracts young professionals and families seeking proximity to Nashville without downtown prices.
Franklin & Williamson County
- Luxury master-planned communities like Westhaven.
- Consistently ranked among the highest median household incomes in the state.
Clarksville
- Military-driven rental and housing demand from Fort Campbell.
- Affordable land costs encourage subdivision development.
- Growing retail and industrial development sectors.
Chattanooga
- Suburban expansion in Ooltewah and East Brainerd.
- Known for its sustainability initiatives, making it attractive for green-certified builds.
Knoxville
- Student housing near the University of Tennessee.
- Residential growth along I-40 and I-75 corridors.
- Expanding medical and research facilities create demand for nearby housing.
Memphis Suburbs
- Collierville, Germantown, and Arlington for single-family builds.
- Logistics-related ground-up construction driven by Memphis’ status as a global shipping hub.
What is the cost of ground up construction in Tennessee?
Understanding costs is important for budgeting and profitability.
Costs vary by location, property type, and materials but generally fall in these ranges:
- Single-family homes: $125–$200 per square foot for mid-range builds; high-end custom homes can exceed $300 per square foot.
- Multifamily developments: $200–$300 per square foot (based on regional averages; costs vary with design and amenities).
Note: Multifamily figures are based on regional and national averages adjusted for Tennessee’s labor and material markets. Actual costs may vary by city and project type.
Factors affecting cost
- Land acquisition price
- Labor and material availability
- Site preparation complexity
- Design specifications
- Impact fees and utility hookup costs
Financing options for ground up construction
Securing the right financing can make or break a project.
Here are the most common options available to developers and investors in Tennessee:
1. Bank construction loans
Traditional banks offer competitive rates, but often require extensive documentation and longer approval timelines.
2. Private lenders
Private lenders like Park Place Finance specialize in fast, flexible ground-up construction loans, making them ideal for developers on tight schedules.
3. Bridge loans
Bridge loans provide short-term financing to acquire land and start construction before securing long-term funding.
4. DSCR loans for new builds
Debt Service Coverage Ratio (DSCR) loans can help investors finance income-producing properties once construction is complete.
Typical ground up construction timeline in Tennessee
A clear understanding of project timelines can help set realistic expectations and maintain momentum.
While each project is unique, the general process is:
- Pre-development (1–3 months): Site selection, feasibility studies, and permitting.
- Site preparation (1–2 months): Clearing, grading, and utility setup.
- Foundation and framing (2–4 months): Building the structural framework.
- Interior and exterior work (3–6 months): Roofing, windows, plumbing, electrical, and finishes.
- Final inspection and occupancy (1 month): Compliance checks and move-in readiness.
Total: 8–16 months depending on scope and complexity.
Risks and challenges
Every development project comes with potential setbacks.
Let’s review the most common risks and how to mitigate them.
- Cost overruns: Rising material or labor costs.
- Permitting delays: Zoning or code compliance issues.
- Financing gaps: Draw schedule mismatches.
- Market fluctuations: Economic shifts affecting demand.
Mitigation strategies include locking in material prices early, working with experienced local contractors, and maintaining contingency reserves.
Tips for success
If you want to maximize returns and avoid common pitfalls, these proven strategies can help guide your Tennessee ground-up construction projects:
- Leverage local expertise: Partner with Tennessee-based architects, contractors, and lenders.
- Stay flexible: Adapt designs to meet changing buyer or tenant preferences.
- Plan for growth: Choose locations with strong long-term appreciation potential.
- Prioritize energy efficiency: Buyers and tenants increasingly value sustainable features.
- Understand local incentives: Some counties offer tax abatements or grants for specific types of development.
Building a profitable future in Tennessee
Tennessee’s ground-up construction market is thriving, fueled by rapid population growth, a strong economy, and a significant housing shortage.
At Park Place Finance, we specialize in fast, flexible construction financing so you can break ground without delays. Whether you’re developing in Nashville, Murfreesboro, or beyond, our expert lending team will guide you from land purchase to project completion.
Let Park Place Finance help you close with confidence. Start your application today.