Middle Tennessee commercial real estate pros surveyed by Southeast Venture largely expect 2012 to be better than last year in a number of ways, but say the biggest obstacle to strong growth in the local property market is the uncertainty tied to the presidential election.
For the second year in a row, Southeast polled dozens of the region's CRE leaders. They expect leasing activity to grow more strongly than sales this year — especially in the office sector, where some people say new developments are needed to absorb demand — and don't see the red-hot apartment market cooling off any time soon.
“When we surveyed our local commercial real estate community last year, a loosening of lending and financing policies was the top reason cited for the optimistic sales outlook,” said Todd Alexander, a principal at Southeast Venture. “The same is essentially true this year, but the elections are clouding the outlook. We won’t know until the elections are over whether the local market will be worse or better off.”
Check out the full report here.
Nashville-area office tenants signed on for more than 730,000 square feet of extra space in 2011, according to the fourth-quarter report by brokerage Cassidy Turley. That number — with the lion's share being split by the Central Business District, Brentwood and Cool Springs — was down a bit from 2010 but enough to push the region's vacancy rate to its lowest point in three years. (See the graph below.)
Cassidy Turley's prediction: Look for rents to rise in 2012, albeit rather slowly, and for developers to break ground on a number of projects.
There are some noteworthy positives on the industrial side of things as well:
• Companies absorbed more than 3.9 million square feet of space, the most since 2006. "This comes off the heels of a bleak 2009 and 2010, when the market took a nosedive and posted a combined total of negative 6.5 million SF."
• The upward leasing trend should continue in 2012, driven in part by the resurgent automotive sector. The Cassidy Turley pros say asking rents and landlord concessions should begin to stabilize — warehouse rents are down almost 8 percent since mid-year while vacancy rates haven't budged.
• On the office side, vacancy rates keep declining and are now down to 11.2 percent from 13.8 percent in third quarter of 2010. That's below even the historical average. Thus, ask rates are on the rise, up a quarter or so on average across all classes and nearing $30 per square foot in Green Hills.
• For the first time in two years, a new large-scale office building is going into the ground — Boyle's latest Meridian project in Cool Springs — and as vacancy nears single digits, other new construction will likely get going relatively soon.
• On the industrial end, vacancy rates are also approaching single digits. They're down to about 10.5 percent, but still above the historical average. East and Southeast of town still have high vacancy numbers — in the high teens — but that's where the action is, too. Industrial has been pretty volatile as manufacturing suffers during the recession — and new construction isn't coming any time soon — but as Spring Hill prepares to fire up the factory, mid-scale auto suppliers could start filling some of the vacant space, especially south of Nashville and along the 840 corridor.
A number of Bridgestone Americas Tire Operations executives and other employees gathered Thursday to reopen their Lebanon distribution center, which was hit by a tornado Feb. 24. Pictured below at the facility are Robert Gardenhire, director of logistics and supply chain management; Vice President of Logistics and Supply Chain Management Isaac Motohashi; Steve Clayton, manager of the distribution center; Thurman White, warehouse manager; and Sam Ferguson, facilities manager.
Community activists in Clarksville have delayed a vote on a proposed 145-acre expansion of a Cumberland River barge terminal they say would overly burden the surrounding neighborhoods. Winn Marine will hold informational meetings in the next two months to explain how their plans won't worsen the area's quality of life.
"Right now we are already operating around the clock. We offload liquid nitrogen for 46 hours straight, and nobody's ever heard it or complained about it and this new terminal won't be any different," said General Manager Chad Swallows.