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4Q 2011 | OFFICE

NASHVILLE

MARKET REPORT

Market Improves in 2011, 2012 Will Be the Time to Act With an economy still recovering from a recession, it’s easy to see the bleak side in the business world, especially in an industry like commercial real estate. However, the numbers from the past year paint a different picture. Though the market has not recovered to pre-recession levels, the market is trending in the right direction.

Updated 7-2011

MARKET INDICATORS 4Q

Forecast

2011

2012

VACANCY NET ABSORPTION CONSTRUCTION ASKING RATE

Nashville Office Market

Summary of Statistics, Q4 2011 Vacancy Rate: 10.3% Absorption: 202,526 SF Under Construction: 333,496 SF Asking Rents Per Square Feet: Class A: $22.51 Class B: $17.45 Class C: $14.91 Overall Rental Rates: $19.92 Downtown Class A: $22.44 Suburban Class A: $22.40

www.colliers.com/Nashville

Vacancy rates are down, absorption is up and there are almost daily announcements about a new development coming to the area. Among these announcements are the 1.5 million square foot office space development by MarketStreet Enterprises in the Gulch, the continued construction at the Trolley Barns at Rolling Mill Hill downtown, the speculative buildings at Meridian in Cool Springs and the project driven by LifePoint Hospitals at Seven Springs in Brentwood. All these factors indicate positive momentum in the office real estate market in the coming year. Business is picking up and landlords are gaining the upper hand in negotiations with the tightening of the market. That means now is the time for tenants to act. Nashville continues to prove itself as a popular city for business relocation, having been named as the “Next Big Boom Town” in 2011 and ranked as the sixth “Best City for Business & Career” by Forbes Magazine. Tennessee was also rated as the fourth best business climate in the Development Counselors International’s latest “Winning Strategies in Economic Development Marketing” survey in 2011. The U.S. Chamber of Commerce named Tennessee as the best state in the country for business based on state taxes and regulations. Recognizing many of the reasons why Nashville has a great business climate, several companies such as Amazon.com, HCA, Nissan North America, 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

$19.92

Q4.11

382

31,098,659

3,218,448

10.3%

2.2%

202,526

487,786

333,496

Q3.11

380

31,039,756

3,399,841

11.0%

2.2%

105,707

285,561

320,820

$19.78

Q2.11

381

31,056,877

3,506,318

11.3%

2.2%

166,274

210,025

267,832

$18.05

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


MARKET REPORT | Q4 2011 | OFFICE | NASHVILLE

In response to the steady demand of office 4Q 2011 | Vacancy Space By Type

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

excel in 2012.” 4Q 2011 | Net Absorption By Submarket 120000

Class C 487,933 SF

100000

Class A 1,151,983 SF

20000 0 Class A

Class B

Class C

-20000

RECENT SALES TRANSACTIONS SALES ACTIVITY PROPERTY

BUYER

SALE PRICE

SIZE SF

SUBMARKET

FBI Building

HCI LP

$5,075,000

30,858

Airport North

2195 Nolensville Pike

Conexicon Americas

$3,250,000

28,000

Airport South

Athlon Building

Giarratana Development LLC

$3,250,000

27,815

West End

St. Cloud Corner

St. Cloud Partners

$3,100,000

76,588

Downtown

Demoss Building

Rodney French

$1,875,000

21,000

Downtown

RECENT LEASING TRANSACTIONS LEASING ACTIVITY PROPERTY

TENANT

SIZE SF

TYPE

SUBMARKET

Nine Corporate Centre

Healthcare Management Systems

60,112

New

Cool Springs/Franklin

Three Corporate Centre

Viacom

43,788

New

Cool Springs/Franklin

The Pinnacle at Symphony Place

Frost Brown Todd

29,771

New

Downtown

Baker Donelson Center

FirstBank

21,958

New

Downtown

Fourth and Church Building

ServiceSource

17,178

Expansion

Downtown

Bold text denotes Colliers International Nashville transactions.

www.colliers.com/Nashville

Airport North

40000

Airport South

Class B 1,578,532SF

Brentwood

60000

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

Cool Springs/Franklin

80000

Downtown

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

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.

“I expect we’ll see a steady increase of speculative building over the course of the year,” states managing partner Nate Greene, CCIM. “This will launch positive growth that will be great for Nashville’s economy and with such a strong business climate already, Nashville is going to really

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.

The relocation and expansion trends will only continue as various market reports have indicated. As companies look outside primary markets such as New York City, Los Angeles and Chicago, secondary cities like Nashville are being targeted for their great spaces at reasonable rates. Thus, office and retail space is filling up fast, especially in submarkets like Brentwood, West End and Cool Springs.

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.

space due to corporate relocations and expansions, developers have identified areas of opportunity in the market. As more buildings are completed, landlords in existing buildings may need to reposition their retention strategies in order to keep tenants interested. This means that potential deals are out there if you know how and where to look.

West End

DEFINITIONS

and Viacom have all relocated to Nashville. Expansion has also become prevalent in the area with several companies including GM, Tractor Supply Co., Service Source, and MedSolutions making moves to grow their businesses here.


MARKET REPORT | Q4 2011 | OFFICE | NASHVILLE

UPDATE

Market Comparisons

OFFICE MARKET

SUBMARKET

BLDGS

TOTAL INVENTORY SF

DIRECT VACANT SF

DIRECT VACANCY RATE

SUBLEASE VACANCY RATE

VACANCY RATE PRIOR QTR

NET ABSORPTION CURRENT QTR

NET ABSORPTION YTD

UNDER CONSTRUCTION

AVG ASKING RATE

AIRPORT NORTH

34

3,660,737

392,211

10.7%

2.7%

10.3%

(2,644)

(41,318

0

$18.23

AIRPORT SOUTH

56

2,852,716

463,171

16.2%

1.6%

16.3%

(4,897)

53,460

0

$14.39

BRENTWOOD

75

4,818,498

259,399

5.4%

0.9%

5.1%

2,934

148,698

0

$20.61

COOL SPRINGS/FRANKLIN

53

4,936,094

255,176

5.2

1.6%

7.6%

117,739

187,088

175,000

$22.42

DOWNTOWN

57

7,583,613

1,370,889

18.1%

3.8%

19.3%

80,959

179,145

90,000

$19.63

GREEN HILLS/MUSIC ROW

42

2,059,615

92,618

4.5%

0.3%

4.7%

5,487

36,420

0

$24.08

METROCENTER

14

1,437,763

90,250

6.3%

1.06%

6.1%

(2,986)

(3,940)

68,496

$16.11

RIVERGATE/NORTH

15

474,037

73,970

15.6%

0.0%

16.7%

5,129

(11,857)

0

$14.65

WEST END/BELLE MEADE

36

3,275,586

220,764

6.7%

2.8%

6.6%

109,239

805

0

$23.50

A

116

16,623,296

1,151,983

6.9%

3.4%

7.9%

185,223

373,544

175,000

$22.57

B

190

11,891,859

1,578,532

13.3%

0.9%

13.7%

28,294

122,282

158,496

$17.45

C

76

2,583,504

487,933

18.9%

0.4%

18.0%

(10,991)

(8,040)

0

$14.91

TOTAL

382

31,039,759

3,218,448

10.3%

2.2%

11.0%

202,526

487,786

333,496

$19.92

CLASS

HIGHLIGHTS FROM THE YEAR • We welcomed Carter Steele in November. Carter has been a broker in the Nashville area for over 20 years and specializes in healthcare services brokerage.

• Company partners, Nate Greene and Bert Mathews were named among the Nashville Post’s CRE 50, a list of the top commercial real estate professionals in the area.

• Four of our office’s brokers received their CCIM designation in October. Congratulations to Shane Douglas, Charlotte Ford, Chris Grear and Radley Hendrixson.

• We welcomed Allison Schepman in July as the new Marketing Director.

• SIOR announced Terry E. Smith as their President-Elect in October. Terry has been a broker for over 30 years and a member of SIOR since 1992. • Colliers International | Nashville sponsored the Nashville Business Journal’s Shaping a Greater Nashville event that featured speaker Mayor Karl Dean.

www.colliers.com/Nashville

• Bert Mathews was named as Chairman of the Nashville Area Chamber of Commerce. • Colliers International was ranked as one of the top 5 commercial real estate brokerage firms in the city in 2011. • We welcomed brokers Bill Buckley in March, who specializes in the industrial brokerage and Bill Schulz in May, who specializes in retail.


MARKET REPORT | Q4 2011 | OFFICE | NASHVILLE

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

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.

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, CCIM DIR +1 615 850 2734 Office/Investment

Charlotte Ford, CCIM DIR +1 615 850 2751 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.

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

Chad Poff DIR +1 615 850 2707 Office/Investment

Chris Grear, CCIM DIR +1 615 850 2702 Office/Investment

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

Vickie Saito DIR +1 615 850 2711 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 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

Lee Paradise DIR +1 615 850 2717 Office/Investment

Accelerating success.


Q4 2011 | Nashville Office | Market Report