I-65 south of Nashville regains construction work

NASHVILLE, Tenn. (AP) — Construction has returned to the Interstate 65 corridor south of Nashville, the region's most popular location for corporate offices.

The question that remains unanswered is whether Nashville's commercial real estate industry has shaken off the lingering effects of the recession and is ready to create new corporate addresses in other areas of the city. According to The Nashville Ledger, developers have announced projects in most of those areas but have been waiting for the economy to improve (http://bit.ly/zSlwYa).

"There's going to be a breakout, but not this year," says Tom Frye, managing director of CB Richard Ellis' Nashville office.

He predicts another reasonably healthy year for the commercial real estate industry but expects everyone to continue exercising caution about building speculative office space which, by definition, is constructed before it is taken by tenants. That was common before the economic downturn but has not been seen for several years - until now.

Boyle Investment Co. is under way with the area's first speculative office building since 2006. The seven-floor, 177,577-square-foot building is part of the company's Meridian development in the Cool Springs Mall area in Williamson County. Boyle also is building a much smaller 15,000-square-foot mixed use building. Both are expected to be finished this summer.

'We all felt that if a corporate headquarters wanted to come to Williamson County, there were not any large office blocks available," Boyle spokesman Shelby Larkin says.

"Although it's risky, it's a calculated risk," she adds. "We do have some leases signed (and) we feel strongly about the Williamson County economy."

Cool Springs, which has the second-best occupancy rate in Middle Tennessee at 6.1 percent, has new office space construction and more in the planning stages.

Boyle isn't alone in that sentiment. Even though no one has been building speculatively in Cool Springs, companies in search of upscale office space continue to move there. Cool Springs and nearby Brentwood now have a vacancy rate of just 6.1 percent, according to an end-of-2011 market survey by CB Richard Ellis. Only the West End-Belle Meade area in Nashville has a lower vacancy rate.

Over the course of 2011, growing or relocating companies took 650,000 square feet of office space off the market across the region. That was somewhat less, but not drastically less, than the typical pre-recession "absorption rate" of 700,000 to 750,000 square feet, says CB Richard Ellis' Frye.

Nashville's overall office market, as measured by the firm's survey, had a vacancy rate of 12.7 percent at the end of last year. The rate reported in the survey varied widely in different parts of the city.

"You have pockets that are doing very well right now," says Pat Emery, president of Spectrum Properties, which manages about 1.4 million square feet of office space in the Cool Springs area, about a third of Cool Springs' total.

Developers are ready to start building when they sense the time is right. Some projects are already moving forward.

Highwoods Properties will build a new 203,000-square-foot corporate headquarters for LifePoint Hospitals. The seven-floor building will be in Brentwood's Seven Springs development. Nashville is considering tax breaks for LifePoint to encourage the company to move from Williamson County to Davidson County.

South of Cool Springs on I-65, Boyle is creating its mixed-use Berry Farms development. Berry Farms, which is being developed in phases over time, will eventually feature more than 3 million square feet of office space ranging from corporate campuses, multi-story buildings, smaller professional offices and mixed use space that combines offices with retail and restaurants. Other buildings will combine office and residential spaces.

"The whole idea of Berry Farms is that sooner or later, Cool Springs is going to fill up. Berry Farms is the next step" south along I-65, says Frye.

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Information from: The Nashville Ledger, http://www.nashvilleledger.com

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I-65 south of Nashville regains construction work