Downtown office space

[frankliner]

The Financial Center just got rebranded by Fifth Third Bank. Good news.

http://www.tennessean.com/apps/pbcs.dll/ar...NESS01/60728010

Downtown office space overall is struggling. Bad news.

http://www.tennessean.com/apps/pbcs.dll/ar.../607280401/1003

The 2nd article seems to suggest more spread out midrise buildings are more attractive as office space. I think this has been discussed before, but have there been any major renovation initiatives of buildings that have high vacancy rates downtown? Would these initiatives rectify the problems discussed in the article?

[southsideJ]

That last article is one that I am glad was written. It presents a good rebuttal to the argument that mass transit should not be considered or even funded by the local and federal gov'ts--and the argument that it isn't warranted b/c not enough people use the current very limited (and increasingly more limited) service as it is presently. Better transit in/out of the city is the way to solve the parking problem and attract business back into the CBD.

Hopefully this issue will be at the forefront for the next mayor.

[Richard Lawson]

I am glad someone posted that downtown office story so I can poke holes in it. I hate to say this but the story may have made the writer something of laughing stock among real estate brokers. Well not just that story.

Downtown has actually been improving over the past couple of years. Through this year, vacancy dropped to 11.8% from last year's nearly 15%. Average rents have gone up. I deal with the Nissan thing in a minute. But if you drill down in the numbers, what is killing the downtown vacancy rate is Class-C office space. There's 1 million square feet of the old space, just under a sixth of the overall space, and that is running at more than 17%. That space likely will disappear more and more from the market because they are old buildings that aren't well suited for many tenants. Maybe small law firms take the space. But want may occur is that the space is converted to other uses. The Class A side has 11.3% vacancy or 558,000 feet of 3.5 million. That's down from nearly 17% last year. Many real estate brokers think that the CBD has been doing well and is on the upswing.

Here's what I wrote about it in a story on the overall market:

"Downtown's vacancy picture continues to improve. It helped that Nissan took 133,000 square feet in the BellSouth Tower, though on a temporary basis. That space will come back on the market in a couple of years. Downtown vacancies are running at 11.8 percent, according to Colliers, down from 14.9 percent last year. Nashville Commercial puts the central business district at 10.5 percent overall vacancy.

The Central Business District has long struggled with vacancy. "Downtown has always been a desirable location for banking, financial and professional organizations; however, over the past few years it has lacked a sense of identity as traditional downtown companies vacated the CBD for the suburbs or tenants were lost due to corporate consolidations," Colliers report states. "The look and venues are changing with interest and occupancy rates in the CBD on the upswing."

The airport area is another troubled area. It continues to show the worst vacancy in the area, with both reporting more than 20 percent vacancy. "The CBD and airport area are going to fill up by default," Fleming said.

He said tenants looking for space now will explore the CBD and the airport area because they can't wait for the new construction to be completed. "I'm seeing a lot more interest in the airport area now that I have over the past year," Fleming said."

Nissan's space will be the trouble spot in the future because it will leave a 133,000-square-foot hole. Hoever, the city's economic developers have two years to use it to lure another HQ here. One of the knocks on downtown is that much of the empty space hasn't been contiguous. That makes it difficult to lease all at once to a large tenant. That won't be the case with the Nissan space.

[ATLBrain]

OK, I admit this is something of a personal comment about departing Chamber President, Mike Neal, who btw I do not know personally. However it was actually referenced in several published articles that he left b/c some civic leaders were unhappy that several of the companies moving to Nashville didn't locate downtown. I think when the real picture is looked at more closely, that seems unfair to Mr. Neal. Still, I'm far removed from everything that happened. It's clear that the new president will face very high expectations.

[frankliner]

I am glad someone posted that downtown office story so I can poke holes in it. I hate to say this but the story may have made the writer something of laughing stock among real estate brokers. Well not just that story.

Downtown has actually been improving over the past couple of years. Through this year, vacancy dropped to 11.8% from last year's nearly 15%. Average rents have gone up. I deal with the Nissan thing in a minute. But if you drill down in the numbers, what is killing the downtown vacancy rate is Class-C office space. There's 1 million square feet of the old space, just under a sixth of the overall space, and that is running at more than 17%. That space likely will disappear more and more from the market because they are old buildings that aren't well suited for many tenants. Maybe small law firms take the space. But want may occur is that the space is converted to other uses. The Class A side has 11.3% vacancy or 558,000 feet of 3.5 million. That's down from nearly 17% last year. Many real estate brokers think that the CBD has been doing well and is on the upswing.

Here's what I wrote about it in a story on the overall market:

"Downtown's vacancy picture continues to improve. It helped that Nissan took 133,000 square feet in the BellSouth Tower, though on a temporary basis. That space will come back on the market in a couple of years. Downtown vacancies are running at 11.8 percent, according to Colliers, down from 14.9 percent last year. Nashville Commercial puts the central business district at 10.5 percent overall vacancy.

The Central Business District has long struggled with vacancy. "Downtown has always been a desirable location for banking, financial and professional organizations; however, over the past few years it has lacked a sense of identity as traditional downtown companies vacated the CBD for the suburbs or tenants were lost due to corporate consolidations," Colliers report states. "The look and venues are changing with interest and occupancy rates in the CBD on the upswing."

The airport area is another troubled area. It continues to show the worst vacancy in the area, with both reporting more than 20 percent vacancy. "The CBD and airport area are going to fill up by default," Fleming said.

He said tenants looking for space now will explore the CBD and the airport area because they can't wait for the new construction to be completed. "I'm seeing a lot more interest in the airport area now that I have over the past year," Fleming said."

Nissan's space will be the trouble spot in the future because it will leave a 133,000-square-foot hole. Hoever, the city's economic developers have two years to use it to lure another HQ here. One of the knocks on downtown is that much of the empty space hasn't been contiguous. That makes it difficult to lease all at once to a large tenant. That won't be the case with the Nissan space.

I still think that the article raises some important points that businesses face when they decide where to locate in a city (i.e. parking, mass transit, building styles). I hope civic leaders will take that into account when planning for their campaign to lure more businesses downtown.

[Richard Lawson]

I still think that the article raises some important points that businesses face when they decide where to locate in a city (i.e. parking, mass transit, building styles). I hope civic leaders will take that into account when planning for their campaign to lure more businesses downtown.

I haven't gotten into the debate on the mass transit forum. But I'd question how successful that commuter rail will be. I think it just drops people into downtown but how do they get anywhere else outside of downtown? The bus service here really stinks. When I lived in DC, my apartment was on the last bus stop to the Pentagon where the picked up the Metro into downtown DC. I think I put 3000 miles on my new car that year. Have you ever seen Portland's mass transit. Very nice system. Commuter rail and great bus system. A few years ago it open up a street car system in the Pearl District, a newly renovating area and none of the buildings had parking. It wasn't required.

[rocky top buzz]

Here's the reason my company pulled out of the CBD - COST OF PARKING. With that said, since LP Field was built, don't they allow people to park there for free and take the yellow bus downtown?

[Richard Lawson]

Here's the reason my company pulled out of the CBD - COST OF PARKING. With that said, since LP Field was built, don't they allow people to park there for free and take the yellow bus downtown?

The bus pass costs something but it's minimal

[LA_TN]

From 2nd article:

"But recently a third factor may have tipped the balance further toward the suburbs. Since last summer, leaders in Williamson County have approved three separate property tax abatements for companies moving to Cool Springs: $2 million to Community Health Systems Inc., $2 million to Healthways Inc., and $32.5 million to Nissan. Those tax breaks have changed the dynamics, some say."

This has been my complaint against Nashville (and Williamson Co., although I only fault them for coercing a Nashville company). I have said for a long time that if Nashville wants companies to move downtown, they need to put their money where their mouth is! It seems logical that a tax break would be more than worth it for Nashville to retain/attract companies to DT

[Bears]

From 2nd article:

"But recently a third factor may have tipped the balance further toward the suburbs. Since last summer, leaders in Williamson County have approved three separate property tax abatements for companies moving to Cool Springs: $2 million to Community Health Systems Inc., $2 million to Healthways Inc., and $32.5 million to Nissan. Those tax breaks have changed the dynamics, some say."

This has been my complaint against Nashville (and Williamson Co., although I only fault them for coercing a Nashville company). I have said for a long time that if Nashville wants companies to move downtown, they need to put their money where their mouth is! It seems logical that a tax break would be more than worth it for Nashville to retain/attract companies to DT

Would you guys accept giving companies PILOT's? Memphis is giving them out on almost a daily basis, much to the dismay of Smart City, which prefers TIF's. There was one blog post about the need for Memphis to use more TIF's like Nashville to fill up office space. Does Metro not give out TIF's anymore?

[BnaBreaker]

To be quite honest I don't care too much if office space goes downtown so long as it goes to the center city in the form of honest and responsible urban development. Downtown WILL survive just fine, even if, I believe, all the office space in it were to mysteriously disappear. Memphis has little office space in its downtown, and the residential sector has made it more vibrant than it has been in a long time. What bothers me is when office parks are built that take up hundreds of acres out in the middle of nowhere. As long as a company builds inside Nashville, and actually contributes to the urban fabric of the city, let them build in whatever neighborhood they want.