A rendering of Pine Street Flats, a $32 million, 296-unit apartment development, currently under construction in the Gulch.

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A surge of new or proposed apartment construction that includes more than 3,000 new units and 15 separate projects is sweeping across Nashville’s urban neighborhoods, as well as few suburban and small city locations in Middle Tennessee.

Upbeat about the trend, developers and commercial real estate pros are nonetheless cautious about the current burst of activity. Many tie it to demand in niche markets rather than to the apartment market as a whole.

Another way of putting it: There are going to be hundreds of new apartments on the market tailored to white collar workers and others who have the income to afford steeper rents than the average worker. Experts predict less activity in apartments geared towards the average worker, at least in the near future.

“Most of the growth is on the higher end,” says Woody McLaughlin, chairman of Nashville-based apartment manager Parthenon Properties. “They (developers and investors) are all going after a narrow segment. They aren’t aiming for the person who pays $700 a month for a one-bedroom.”

Many of the new apartments coming on the market will likely be double the $700 amount – or more, many local insiders say.

Tarek El Gammal, a broker at Southeast Venture and project manager for a proposed 60-plus unit mixed-used development at 2310 12th Ave. S., says higher-end developments are getting built because they are relatively conservative investments and more easily funded.

“One-third of the current projects are backed by Freddie Mac and Fannie Mae,” El Gammal says. “It provides liquidity and gives the assurance that investors won’t be caught in a bind financially.”

The 12South project is emblematic of many of the apartments proposed or under construction. It’s close to downtown, located in an established neighborhood with almost-instant access to restaurants and retail stores. El Gammal says rental rates will likely be in the $1.80- to $2-per-square-foot range. Potential renters include young professionals, students, empty nesters and professors at local universities.

It’s the same story in the Gulch, where the $32 million, 296-unit Pine Street Flats is under construction, and on Elliston Place, where Elliston 23, a $50 million apartment and retail project is taking shape.

Jim Cheney, a spokesperson for Southern Land Co, developers of Elliston 23, says the project will be “iconic” and “activate the street.” It’s designed with a certain tenant in mind, one who values walkablity, access to restaurants, stores and parks, and who has extra money to spend.

Elliston 23 is within easy walking distance of two large hospitals, Vanderbilt University, the busy West End corridor, Centennial Park and about a mile from downtown Nashville.

“More and more people want the convenience,” he says. “They want to be close to where they work and they don’t use their cars as much. This type of project is where the action is.”

Current and future apartment developments are also the buzz in the Gulch.

“We can’t build them fast enough,” says Dirk Melton, development director at MarketStreet Enterprises, the Nashville-based company that’s serves as master developer of Gulch.

“Essentially there are no rentals available in the neighborhood right now. Developers have thoroughly studied the market and are being very careful about their investment decisions. They have a strong interest in downtown and urban projects.”

Ray Hensler, president of Market Realty Advisors, says the Gulch, which is only about one-half developed, will continue to be attractive to investors and developers eyeing the multi-family market.

“I think you could spend the next 10-15 years filling in the nooks and crannies between downtown and Vanderbilt, but it’s clear to most that the Gulch has the best near-term prospects (for apartments and multi-family housing),” Hensler says.

Hensler says other urban pockets such as Elliston Place, 12South and Music Row are highly favored for apartment development.

“It’s the same upward spiral of activity that’s occurring in cities like Austin, Portland, Denver and Charlotte,” Hensler says. “High-quality LEED projects like Elliston 23 and Pine Street Flats add to our supply but also make the in-town ‘pie” bigger.”

Hensler, who developed the highly-successful Adelicia condo tower near Music Row, is expected to soon announce plans for his own 300-unit, upscale apartment high-rise in the Gulch. The project has not been formally announced, and Hensler declined to talk about it when asked. According to bidclerk.com, a service that allows developers of large-scale construction projects to solicit for bids from general contractors, Hensler is already asking for bids on the project.

Why is the demand for amenity-rich apartments so high?

“The economy has made it harder to buy houses, and some people just don’t want to,” Cheney says. “Younger people are generally waiting longer to buy. Plus, Nashville is continually ranked as one of the best places to live, move or start a career.”

Hensler sites the sky-high demand for rental condos as an indicator.

“You really have to look at the 300-400 rented condos in the Adelicia, Icon, Terrazzo, Encore and Viridian to see how strong of a demand there is for premium units,” Hensler says. “Everything that has been made available has leased at premium rental units prices nobody thought was possible here.”

Developers aren’t the ones noticing the demand.

Kim Fennell, owner of Main Street Realty, says she’s flooded with requests for rentals.

“I’ve seen a 400 percent increase in the past six months,” Fennel says. “I work in a lot of areas, but I can tell you some of the places people really want to be and 12South is at the top. I also get a lot of requests for Germantown and East Nashville.”

Silas Deane, president and CEO of Baden Bath, is seeing a jump in demand from the supply side. The company sells luxury bath fixtures such as toilets, sinks and faucets.

“We are seeing an increase all over the Midstate, including a lot of activity in Clarksville and Spring Hill,” Deane says. “With occupancy rates over 90 percent, it’s really becoming competitive. The customer is demanding nice products – dual flush toilets, better shower heads and sleeker, higher-grade faucets.

“In the past six to eight months there’s been a big jump in RFPs (request for proposals),” Deane says. “The bottom line is that rents are increasing and renters expect more.”

James Chavez, CEO and president of the Clarksville Area Chamber of Commerce, says Clarksville is mirroring Nashville’s apartment development, but on a smaller scale.

“It’s a hot market, especially for nicer properties,” Chavez says. “We are getting a lot of calls from larger developers. If they aren’t already here, they are going to be here. The demand exists because Austin Peay University is growing, soldiers are returning home and we are adding jobs because of projects like the Hemlock Semiconductor plant under construction.“

A new mixed-use development with 80-plus units and retail space in downtown Clarksville is expected to be announced soon, Chavez says.

Thanks to the Carroll Companies, a Greensboro, N.C., apartment developer, the local suburban market could soon perk up, too.

In October 2011, the company announced plans to invest up to $190 million in the suburban market and build five or six upscale apartment communities over the next few years.

The Carroll Companies prefer to go into markets that can sustain several projects that they can stick with over a long period of time.

Carroll declined to comment about the two projects under contract, but says they are located in Wilson County near Mt. Juliet and on the eastern side of Davidson County. The company is also actively prospecting for sites in Williamson County and Rutherford County, and getting ready to open a regional office in Middle Tennessee.

“We believe the Nashville market and surrounding areas are going to be strong in the long term,” Carroll says. “We took a look at everything – the rental and occupancy rates, the employment centers and recreational areas. We really liked what we saw.”