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2Q 2011 | OFFICE

NASHVILLE

MARKET REPORT

Office Market Recovery Gains Momentum

Updated 7-2011

MARKET INDICATORS 1Q

2Q

2011

2011

VACANCY NET ABSORPTION CONSTRUCTION RENTAL RATE

Nashville Office Market

Summary of Statistics, Q2 2011 Vacancy Rate: 11.3% Absorption: 68,010 SF Under Construction: 214,952 SF Asking Rents Per Square Feet: Class A: $22.16 Class B: $17.34 Class C: $14.71 Overall Rental Rates: $18.05 Downtown Class A: $22.79 Suburban Class A: $22.38

www.colliers.com/Nashville

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With the first quarter of 2011, the Nashville market showed little growth. The second quarter welcomed more market movement and ultimately, positive growth. Second quarter absorption posted positive 166,274 square feet, which is more than double from the first quarter. The year-to-date absorption is a positive 210,025 square feet. The majority of absorption this quarter has occurred in the Downtown submarket at 34,294 square feet and 73,989 square feet year-to-date. This is a drastic change from last year when Downtown had negative absorption and suburban markets like Cool Springs had high positive absorption. For the past year rental rates have remained stable with only a slight decrease overall. The overall rental rate, which includes Class A, B and C rates, is at $18.05. This is a decrease from last quarter by $1.66. In addition to decreasing rental rates, vacancy rates are also decreasing as indicated by first quarter numbers. Vacancy rates had a slight drop from 11.9% last quarter to 11.3% this quarter. Surprisingly, in six out of nine submarkets, vacancy rates are 10% or less. Vacancy rates in the 0% to 10% range suggest a stabilizing market where the negotiating leverage will begin to swing back in favor of landlords. Although the Central Business District boasted substantial leasing activity this year, direct vacancy rates in the CBD continue to remain elevated at 19.4%. Sublease vacancy rates have increased for the first time in six quarters. The current available sublease square footage is 713,049. Quarterly Comparisons and Totals TOTAL QUARTER

BLDGS

INVENTORY SF

DIRECT VACANT

DIRECT

SUBLEASE

VACANCY

VACANCY

RATE

RATE

NET ABSORPTION CURRENT QTR

NET

UNDER

AVG

ABSORPTION

CONSTRUCTION

ASKING

YTD SF

SF

RATE

$18.05

Q2.11

381

31,056,877

3,506,318

11.3%

2.2%

166,274

210,025

267,832

Q1.11

419

33,633,050

3,641,291

11.9%

2.0%

68,010

68,010

128,110

$19.71

Q4.10

380

30,983,891

3,701,006

11.9%

2.0%

101,282

609,124

128,110

$20.05

Q3.10

380

31,003,721

3,739,721

12.1%

2.1%

167,858

501,370

101,510

$20.10

Q4.10

376

30,741,103

3,771,707

12.3%

2.1%

206,766

306,600

55,000

$19.83


MARKET REPORT | Q2 2011 | OFFICE | NASHVILLE

2Q 2011 | Vacancy Space By Type

2Q 2011 | Net Absorption By Submarket

Class C Building - Buildings competing for tenants requiring functional space at rents below the average for the area.

70000

Class A 16,653,296 SF

60000 50000

10000 Class A

Class B

0

Class C

-10000

RECENT SALES TRANSACTIONS SALES ACTIVITY PROPERTY

SALES DATE

SALE PRICE

SIZE SF

SALES PRICE/SF

SUBMARKET

1009-1021 Windcross Ct

5/6/2011

$23,000,000

133,299

$172.54

Cool Springs

633 Thompson Lane

4/05/2011

$2,015,000

26,600

$75.75

Airport South

RECENT LEASING TRANSACTIONS LEASING ACTIVITY PROPERTY

TENANT

TYPE

SUBMARKET

Highland Ridge II

Allstate

64,941

Renewal/Expansion

Airport North

Airways Plaza

Correct Care Solutions

45,000

New

Airport South

Palmer Plaza

Actus Lend Lease

37,428

Renewal

West End

The McEwen Building

Carlisle Transportation

37,428

New

Cool Springs

SunTrust Plaza

Creative Artists Agency

23,500

New

Downtown

Bold text denotes Colliers International Nashville transactions.

P. 2

SIZE SF

| COLLIERS INTERNATIONAL

Airport North

20000

Airport South

30000

Brentwood

Vacancy Rate - Percentage rate of the total amount of physically vacant space divided by the total amount of existing inventory.

Cool Springs/Franklin

40000

Class B 11,832,959 SF

Downtown

Total Building SF - All single & multi tenant office buildings above 20,000 SF excluding medical, government and owner occupied.

80000

Class C 463,015 SF

Green Hills/Music Row

Class B Building - Buildings competing for a wide range of users with average rents. Building finishes are fair to good for the area and systems are adequate but the building does not compete with Class A at the same price.

Metrocenter

Class A Building - Most prestigious buildings competing for premier office users with rents above average for the area. Buildings have high quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence.

Rivergate/North

Absorption - The net change in occupied space between the current quarter and the previous quarter, calculated by summing all the positive changes in occupancy and subtracting all the negative changes in occupancy.

areas outside the CBD. One such project is the Boyle Investment Co. Berry Farms project. This project is a mammoth mixed-use development in Williamson County approximately five minutes from Cool Springs. The project is expected to include 3.5 million square feet of office space. With projects like this on the horizon, now is the perfect time for companies to start thinking about looking to Nashville for relocation and expansion.

West End

DEFINITIONS

For the Nashville Metropolitan Statistical Area (MSA), there is approximately 3,506,318 square feet available. The majority of this space is found in the CBD with 1,468,986 square feet. Other areas have significantly less available space available in comparison. A lack of blocks of 100,000 square feet could be putting Nashville at a competitive disadvantage when it comes to company relocation and expansion if companies are uninterested in finding space in the CBD. However, there are spaces that have recently begun construction that will add available square footage to


MARKET REPORT | Q2 2011 | OFFICE | NASHVILLE UPDATE

Market Comparisons

OFFICE MARKET CLASS

BLDGS

TOTAL INVENTORY SF

DIRECT VACANT SF

DIRECT VACANCY RATE

SUBLEASE VACANCY RATE

VACANCY RATE PRIOR QTR

NET ABSORPTION CURRENT QTR SF

NET ABSORPTION YTD SF

UNDER CONSTRUCTION SF

AVG ASKING RATE

AIRPORT NORTH A

10

1,913,290

127,815

6.7%

4.4%

5.5%

(2,154)

5,728

0

$18.69

B

23

1,704,947

237,854

14.0%

0.0%

13.3%

16,826

14,948

0

$15.96

TOTAL

33

3,618,237

365,669

10.1%

2.3%

8.9%

14,672

20,327

0

$16.90

AIRPORT SOUTH A

8

565,231

0

0.0%

4.0%

0.0%

6,878

4,471

0

$19.50

B

17

1,423,036

243,152

17.1%

2.6%

14.0%

2,790

13,460

0

$14.52

C

31

864,449

268,477

31.1%

0.0%

29.2%

3,540

(579)

0

$12.42

TOTAL

56

2,852,716

511,629

17.9%

2.1%

15.6%

13,208

17,352

0

$13.24

BRENTWOOD A

28

2,464,234

150,241

6.1%

0.9%

6.1%

32,198

36,928

0

$22.60

B

43

2,242,704

179,773

8.0%

0.6%

7.4%

2,015

18,831

0

$19.29

C

3

95,160

2,300

2.4%

0.0%

2.4%

0

0

0

$16.00

TOTAL

74

4,802,098

332,314

6.9%

1.0%

7.5%

30,183

55,759

0

$20.33

COOL SPRINGS/FRANKLIN A

30

3,899,447

337,054

8.6%

1.5%

7.4%

77,793

29,515

0

$22.37

B

23

1,036,647

68,071

6.6%

3.5%

6.1%

(8,512)

(10,596)

0

$16.43

TOTAL

53

4,936,094

405,125

8.2%

1.9%

7.2%

69,281

18,919

0

$20.04

DOWNTOWN

A

11

3,844,729

652,424

17.0%

6.7%

17.3%

12,646

37,350

0

$22.79

B

37

3,369,509

782,777

23.2%

0.6%

23.8%

18,313

42,213

90,000

$15.84

C

9

369,375

33,785

9.1%

0.7%

10.0%

3,335

3,335

0

$15.96

TOTAL

57

7,583,613

1,468,986

19.4%

3.7%

19.8%

34,294

73,989

90,000

$17.63

1.5%

0

15,801

0

$27.00

GREEN HILLS/MUSIC ROW A

8

962,539

14,074

1.5%

0.5%

B

21

731,037

49,644

6.8%

0.2%

6.8%

333

3,401

26,600

$19.88

C

13

366,039

30,890

8.4%

0.0%

10.1%

6,236

11,986

0

$19.15

TOTAL

42

2,059,615

94,608

4.6%

0.3%

4.9%

6,569

31,188

26,600

$20.51

METROCENTER A

4

476,974

5,323

1.1%

0.0%

1.1%

0

3,000

98,352

$17.38

B

5

524,862

52,170

9.9%

6.0%

9.9%

0

(2,095)

0

$14.75

C

5

423,045

27,912

6.6%

0.0%

6.6%

0

0

0

$15.25

TOTAL

14

1,424,881

85,405

6.0%

2.1%

6.0%

0

905

98,352

$15.53

234,680

23,107

9.8%

0.0%

9.8%

0

8,760

0

$20.50

RIVERGATE/NORTH A

5

B

3

88,952

10,950

13.4%

0.0%

13.4%

0

0

0

$14.50

C

8

187,4405

29,314

15.6%

0.0%

15.6%

0

104

0

$12.92

TOTAL

16

504,037

63,371

12.6%

0.0%

12.6%

0

8,864

0

$16.11

3.1%

5.1%

3.0%

(2,057)

(13,632)

0

$2600

WEST END/BELLE MEADE A

13

2,292,172

70,409

B

16

718,265

38,465

5.4%

0.0%

5.4%

0

(140)

0

$19.36

C

7

265,149

70,337

26.5%

0.0%

26.6%

124

(3,506)

0

$16.65

TOTAL

36

3,275,586

179,211

5.5%

3.4%

5.4%

(1,933)

(17,278)

0

$20.40

NASHVILLE MARKET TOTAL A

117

16,653,296

1,380,447

8.3%

3.4%

8.3%

125,304

127,921

98,352

$22.16

B

188

11,832,959

1,662,856

14.1%

1.2%

13.0%

27,735

70,764

116,600

$17.34

C

76

2,570,622

463,015

18.0%

0.1%

16.7%

13,235

11,340

0

$14.71

TOTAL

381

31,056,877

3,506,318

11.3%

2.2%

11.9%

166,274

210,025

214,952

$18.05

COLLIERS INTERNATIONAL |

P. 3


MARKET REPORT | Q2 2011 | OFFICE | NASHVILLE

512 offices in 61 countries on 6 continents

RIVERGATE/ HENDERSONVILLE

Gallatin Rd.

NORTHWEST

WILSON COUNTY

METRO CENTER

DOWNTOWN

Le

ba no n

Pl .

CENTRAL BUSINESS DISTRICT

AIRPORT NORTH

United States: 125 Canada: 38 Latin America: 18 Asia Pacific: 214 EMEA: 117

lvd.

BRENTWOOD

AIRPORT SOUTH

lR d.

Hickor yB

Be l

Av e.

tE nd es

GREEN HILLS MUSIC ROW 100 OAKS

y ile . B r k wy P

d. lle R

O ld

ding Pl.

nsvi No l e

W

Ha r

mon t B lv d .

Donelson Pike

• $1.5

WEST END W ood

billion in annual revenue

• 979 million square feet under

management

Mu rfr e

• Over 13,000 professionals es bo ro Rd .

UNITED STATES:

Moores Ln .

Fra nkl in

RUTHERFORD COUNTY

COOL SPRINGS/ FRANKLIN

Figure 1: Nashville Office Submarkets include Airport North, Airport South, Brentwood, Cool Springs/Franklin, Downtown, Green Hills/Music Row, Metrocenter, Rivergate/North and West End/Belle Meade.

Nashville Nate Greene Managing Partner 300 Broadway Nashville, TN, 37201 TEL +1 615 850 2729 FAX +1 615 850 3229

RESEARCHER:

Nate Greene, CCIM DIR +1 615 850 2729 Office/Investment Managing Partner

Bert Mathews DIR +1 615 850 2701 Office/Investment Principal

Shane Douglas DIR +1 615 850 2734 Office/Investment

Richard Fulton, CCIM DIR +1 615 850 2719 Office/Investment

Nashville Allison Schepman Marketing Director 300 Broadway Nashville, TN, 37201 TEL +1 615 850 2748 FAX +1 615 244 2957

Copyright © Colliers International The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it.

Chris Grear DIR +1 615 850 2702 Office/Investment

John Gifford, CCIM DIR +1 615 850 2713 Office/Investment

Lee Paradise DIR +1 615 850 2717 Office/Investment

Chad Poff DIR +1 615 850 2707 Office/Investment

ABOUT COLLIERS INTERNATIONAL – NASHVILLE Collier International Nashville is one of the largest full service commercial real estate firms in the region. Its brokers provide a myriad of services to owners and tenants with a commitment to excellence that has won them the respect of local, national and international clients for many years. With more than 25

Vickie Saito DIR +1 615 850 2711 Office/Investment

employees, the firm serves clients ranging from Fortune 500 corporations, major banks and insurance companies to investors, private institutions and small businesses.

www.colliers.com/Nashville

Accelerating success.


Q2 2011 | Nashville Office | Market Report