| NASHVILLE OFFICE MARKET
David Huddleston and Hilton "Buck" Forcum
appears that for 2002, the Nashville, Tennessee, office market will have
a negative net absorption for the first time in 20 years. For the first
9 months, our net absorption was negative 460,000 square feet, according
to Grubb & Ellis|Centennials David Huddleston, managing director,
and Hilton Buck Forcum, senior associate.
The good news is that only 135,000 square feet of new space is under
construction and we believe the Nashville office market has bottomed out,
they continue. Our economy is very diverse and we always bounce
back before the rest of the nation. We wont be surprised if net
absorption for 2003 is over 850,000 square feet, which is the average
for the 5 years prior to 2002.
the past 10 years Nashvilles average vacancy rate has been 11 percent,
and between 1982 and 1991 the average vacancy rate was 21 percent. Put
in context, the current 15.6 percent vacancy rate isnt that bad.
To a large extent the current vacancy rate is due to the fact that 2.9
million square feet of new space was added in 2000 and 2001.
A significant development of note is Burton Hills IV, a 135,000-square-foot
building in the Green Hills submarket. This is the only speculative office
building of any size that is presently under construction. It is approximately
80 percent leased.
Many developers would like to come to Nashville, but it is a tough
market to break into, say Huddleston and Forcum. The most active
developers in recent years have been Crescent Resources, Highwoods Properties,
Hines, Duke Realty Corporation, Alex Palmer, Gaedeke Landers and Cumberland
The largest recent lease was to Bridgestone/Firestone, which leased 210,000
square feet in the Highland Ridge Office Park in the Airport area. Vanderbilt
Medical Center also recently completed the lease/purchase of the Crystal
Terrace Building on West End and plans to occupy about 70,000 square feet
in the building. Vanderbilt University has also signed leases for approximately
70,000 square feet in two other buildings in the West End area in the
last 6 months. Nashville has many strong private healthcare management
companies such as HCA that occupy large blocks of office space.
Rental rates for Class A space range from $16.50 to $23 per square foot.
The vacancy rate is 15.6 percent overall, with Green Hills having the
lowest vacancy rate (9 percent) and MetroCenter the highest (30 percent).
For the past 5 years, the Brentwood/Cool Springs submarket has grown due
to new development. Huddleston and Forcum say the Brentwood/Cool Springs
submarket will continue to be vibrant over the next 12 months, but the
Airport area will also attract significant activity due to the attractive
deals that are being offered. A recent example is the 210,000-square-foot
lease by Bridgestone/Firestone.
David Huddleston is managing director and Buck Forcum is senior associate
with Grubb & Ellis| Centennial.
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