This came up in a programming context. A group of objects, that are nearby another one, was simply called: “nearbys”. These could be actual places/ locations or really random objects.
This raised questions: 1. Is this nominalization actually valid or used in everyday language use?
It is common to use nominalised adjectives:
“The sick, the lame, and the lazy came begging for money.”
In their adjectival state, they represent an ellipsis of their plural noun (above it would be “people”) but are usually uncountable as they describe the defining characteristic of an homogenous generality. (The sick = all who are sick)
*“The sicks, the lames, and the lazies came begging for money.”
However, words that commonly function as adjectives can function as common nouns and are countable:
“See those red balls and the blue ones? Give me the red.”
“See those red balls and the blue ones? Give me a red.”
“See those red balls and the blue ones? Give me the reds.”
In your example, nearby is countable, and thus a common noun.
Also would it need to change the y in the plural form?
No. the spelling "nearbys" seems most useful to prevent the pronunciation of nearbies as "nearbees".
The word, as coined and defined, is good: it's meaning is clear and apt. I have no problem with it.