Is bar being raised, or boom to loom, for office projects? | Nashville … – Nashville Post (subscription)

Urban Nashville seemingly needs new office space.

Or so the experts say.

Developers are listening, with two Chicago-based Monroe Investment Partners and The Mainland Companies (co-based in Nashville and Portland, Oregon) having recently announced major office projects.

Monroe said in early January work will begin this year on the ambitious River North. Mainland said two weeks ago it wants to develop a 30-story tower on SoBros Korean Veterans Boulevard Roundabout.

And others want a piece of the office building action.

For example, Eakin Partners, which recently completed 1201 Demonbreun in The Gulch, is seeking to undertake mid-rise office buildings within both Rolling Mill Hill and the West End corridor.

Also, office space is a component of the mixed-use oneC1TY development on Midtowns fringe, the Germantown Union mixed-use project Atlanta-based TPA Group has announced and Spectrum | Emerys planned mixed-use Fifth + Broadway.

But at 125 acres, River North represents a much larger scale (picture Portlands South Waterfront) than the aforementioned developments. The site straddles the east bank of the Cumberland River, stretching from Jefferson Street on the south to the Interstate 65/24 split on the north. The segment scheduled to begin construction this year, to be called The Landings, is projected to span 40 acres, with office, retail, residential and hospitality buildings eyed.

Indeed, the River North land mass dwarfs the 15-acre LifeWay campus site soon to be reinvented within the central business district and the 32-acre land mass on which the Capitol View mixed-use development is underway in North Gulch. (Both to offer office space, no less.)

Not surprisingly, some wonder if the city can absorb such robust development in general and office building construction specifically. Could Monroes proposed venture, they ask, mark a new level of growth or a potential oversaturation?

While the citys capacity to effectively handle such new development may seem limited even strained these days, the general Nashville market actually is experiencing a period of relatively meager office building addition.

From about 1996 to 2000, 72 buildings totaling 6.5 million square feet were constructed in the overall Nashville market, according to Rob Lowe, senior managing director at Cushman & Wakefield.

In 2001 and 2002, the market witnessed the construction of 28 buildings with office space, totaling 2.86 million square feet, according to Katie Barton, the director of research for Colliers Internationals Nashville office. Cool Springs and Brentwood led the market in the collective square footage added then.

The boom of the mid-2000s saw the construction start, continuation or conclusion of 37 buildings for a collective 3.57 million square feet, according to the Colliers figures, with Cool Springs accounting for 60 percent of that number.

During this latest boom from 2013 to 2016 just 20 buildings with office space were constructed, accounting for 2.93 million new square feet. This comparatively light influx, however, was spread evenly throughout various Nashville submarkets. For example, a significant number of projects were undertaken in Cool Springs, Brentwood, Green Hills, Music Row and West End last year, an indicator that demand is still widespread and healthy.

With the size and variety of companies relocating to Nashville and even companies moving from place to place that are already located within the region there seem to be markets for so many different types of commercial and office spaces and in a variety of different locations, said Gary Gaston, executive director of the Nashville Civic Design Center. A company that wants to be downtown is going to be different from a company that wants to be in Cool Springs. It is all about offering a variety of office types spread throughout the region, which allows us to be most competitive [with peer cities].

Lowe said office construction projects expected to start over the next two years will yield about 4 million square feet, with the potential for an additional 5 million to start in 2019 and 2020. Based on those projections, he thinks the next eight years could bring yet another major boom in office space development.

But caution is warranted if you look at the total list of announced projects, which if built out to capacity, the maximum amount of office space could surpass 14 million square feet over 80-plus buildings, he said.

Lowe does believes that if previous booms are any indication, River North, the LifeWay campus and Capitol View all have the chance to be successful over time.

If you look at the historical absorption, the net amount of leasing activity, over each growth cycle, it is reasonable to predict that each of these developments will win their fair share, he said. But implicit in that assumption is that its unlikely that any of these larger, currently undeveloped projects will be completely build out simply due to the sheer amount of square footage each can deliver. Of course, there will be one that is more successful than the others and that is much harder to predict.

The key to success in real estate has always come down to location. Monroe Investment Partners expects River North to expand what we think of as downtown, the company said in a press release upon announcing the project.

As they eye office, retail, hotel and residential space, the developers of Capitol View (Boyle Nashville and Northwestern Mutual), the LifeWay site (Southwest Value Partners) and River North likely are banking on the opportunity, to an extent, of establishing new urban nodes within the greater downtown area.

But could the competitive creation of urban districts result in none of the nodes reaching maximum build-out?

If all the office projects get built out to their projected numbers, then the central business district will just about triple its current size, said Barry Smith, president of Eakins Partners, which is possible, but I cant imagine it happening any time soon.

River Norths location may be the deciding factor for its place among the others in a potential next up-cycle. Its hard to say if that bodes well for the project or not.

River North is a bit of a crapshoot, said Smith. When you look at the map, its north of Jefferson Street [and east of Germantown] and not just across the river from downtown. So, its more of a new submarket than just being directly across the river [and near Nissan Stadium].

Its difficult to predict where, or if, the form and function of the proposed urban nodes ringing the CBD. If one does, indeed, fully evolve, it could certainly mark a substantial new era of prosperity for the city as a whole.

The larger scope of these office developments is in line with many companies that are looking on a national basis for headquarters and regional headquarters, said Harrison Johnson, senior vice president for brokerage services with the local CBRE office. Nashville has traditionally only seen a smaller segment of this form of economic development in shared services and smaller headquarters. So, it is imperative that we have these interesting areas for larger relocating companies to consider.

It could well be River North that welcomes a major corporate headquarters. Ultimately, the viability of any new office development will be decided by demand from prospective tenants, those interviewed for this story said.

I truly dont see a single submarket being vastly better than another, and we are forecasting the development growth across virtually all submarkets, Cushman & Wakefields Lowe said. The key to understand is that each submarket presents its own value proposition to employers.

That being said, there is reason to believe that River Norths prospective location is set up for success, as long as the development delivers on its promise.

One only needs to look at other cities that have successfully developed both sides of their river Cincinnati and Austin for example to understand that the key element isnt one side versus the other but [rather] the concentration of amenities that office tenants demand, said Lowe.

River North will need these amenities to deliver successfully initially, he added. But in scanning the developers vision, it appears River North is planned for a broad delivery of uses and amenities.

Post Managing Editor William Williams contributed to this story.

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Is bar being raised, or boom to loom, for office projects? | Nashville ... - Nashville Post (subscription)