The City Paper
by William Williams
The Nashville market enjoyed a very respectable 2011 with its commercial real estate sector.
If 2011 was not the most successful year in recent memory for Nashville-area real estate, the 12-month period nonetheless ranked as one of the more unusual for those who make their living in the industry. The year saw surprises, emerging trends, interesting announcements, and continued questions. What 2011 lacked in stability and high-dollar transactions and investments, it compensated with steady growth, pricing stabilization, and underrated deals.
During the past 12 months, numerous construction sites began to hum, a Fortune 500 company made a foray into the city, hotels were announced, and numerous restaurants and boutiques opened (and closed). On top of that, companies started construction, neared completion, or announced plans for more than 3,100 for-rent apartments in large-scale buildings close to Nashville’s core.
True, Nashville lacks the cranes it saw in the mid-2000’s, but the city got its concrete-and-steel buzz back this year.
In short, 2011 was respectable for the real estate sector. For high-profile apartment buildings, the year was stupendous. As December concluded, Nashville had eight rental residential buildings of 50 units or more under construction. Seven others are planned.
"In absolute terms, this [building boom] is unprecedented," Woody McLaughlin, a member of the Greater Nashville Apartment Association and the entity’s expert on the city’s rental residential property statistics, told The City Paper in early November.
Vista Germantown started the process in late 2010, and 2011 simply accelerated the momentum. "It will have a [visual] impact similar to the impact the condominiums [built in the 2000’s] had, but the massing won’t be quite on the same scale," said Marion Fowlkes, principal of Green Hills based Centric Architecture. "We don’t need to be building outside the core. We need to build inside. The infrastructure is already in place."
Though likely the dominant element of Nashville’s 2011 real estate activity, construction of large-scale apartments was joined by other land-use themes of note.
Mark Woolwine, senior associate and member of the Office Properties Group at the Nashville office of CB Richard Ellis, listed as 2011 highlights, the continued positive absorption for the Nashville office market and outlined three suburban-oriented themes:
- The city still has one of the lowest suburban office vacancy rates in the country.
- Boyle Investment Co. broke ground on a Class A speculative office building in Cool Springs.
- LifePoint’s announcement of a new 200,000-square-foot building for its headquarters
When asked for a disappointment, Woolwine said, "Major office users that have backed off their decision to relocate to the Central Business District."
Jeff Haynes, managing partner with the Franklin office of Memphis-based Boyle, said 2011 saw the industry get "back to basics and fundamental balance."
"The balance sheet of the borrower really matters," said Haynes, whose company scored a major coup at the year’s end when Northwestern Mutual bought about 32 acres of North Gulch property from Crosland and named Boyle its consultant for the land’s future usage.
"Banks are back making loans," Haynes added, "but they are looking to the wherewithal of the development sponsor, which they should have been doing all along."
Echoing Woolwine, Haynes said that 2011 was a very respectable year for the area’s commercial real estate sector. Not even the fact that construction of the Nashville Medical Trade Center did not begin as originally planned when the project was announced in 2009 seems to have dampened enthusiasm.
"The year was far better than expected," Haynes said, adding that large-scale apartment construction, retail leasing, and rising office occupancies were highlights. "Especially relative to other markets. Nashville is very fortunate. We started new projects in each area with the exception of industrial."
On the retail theme, space within the urban core enjoyed significant leasing buzz this past year. Charles Robin, who has operated Robin Realty since 1972, said downtown retail space, with a few notable excpetions (for example, Encore), rented well in 2011.
"Leasing in the entertainment district has done very well, not only in 2011, but in the last three years too – even in a down economy," Robin said.
Retail leasing fared "probably better" than Robin expected entering the year, particularly with restaurants renting space.
"Some restaurants were looking to find cheap deals, but those were harder to find in Middle Tennessee than in other places," Robin said. "Don’t get me wrong. Tenants negotiated harder [than in the past] but we didn’t have to give quite the concessions [they sought]."
With the Nashville commercial real estate market ending 2011 on a stable footing, uncertainties remain as 2012 looms.
"If the financial market continues to struggle and the political climate and policy decisions of Washington continue to be gridlocked, then we could see a cooling of Nashville’s growth," Woolwine said.
Still, he is hopeful. "This year should be an interesting one," Woolwine said, "If the economy gains traction, then Nashville should be well positioned for positive growth and recovery."
Other top stories in 2011:
- Medical District – City leaders lauded both the start of the 28th/31st Avenue Connector and the announcement of Health Care REIT Inc.’s One City, which would straddle the connector and Charlotte Avenue. Developers hope to begin construction on the project’s first building in 2012.
- The Gulch – In late 2011, global giant Northwestern Mutual bought about 32 acres of North Gulch property from Crosland, and named Boyle as consultant for future development. A little farther south, MarketStreet announced plans for five commercial buildings and broke ground on the Pine Street Flats.
- Opry Mills – After closing due to the May 2010 flood, management announced a full reopening in March 2012.
- Hotel Hysteria – Last year brought the announcement of a Hyatt Place for SoBro, and Chattanooga-based Vision Hospitality’s acquisition of two Division street parcels. This year, Giarratana Development announced a hotel project across the street, likely a Westin.
- LifePoint – As 2011 concluded, LifePoint hospitals said it will jump the county line, moving from Maryland Farms in Williamson County, to a new campus in Davidson County’s Seven Springs development. Metro offered major tax breaks to lure LifePoint.