2Q
2011
3Q
2011
VACANCY
NET ABSORPTION
CONSTRUCTION
RENTAL RATE
MARKET REPORTNASHVILLE
www.colliers.com/Nashville
Market Still Recovering, Secondary Cities Gain Market Share
As the year progresses, we continue to see recovery and growth in the Nashville market. In fact, Development Counselors International’s “Winning Strategies in Economic Development Marketing” survey, which questions over 300 corporate executives from across the country, recognized Tennessee as the fourth best state for business climate. The Tennessee area, and ultimately the Nashville MSA, is attractive to companies for its friendly communities, low operating costs and attractive business culture. The market is reflecting this positive outlook on the local business strength and future.
The article “Back to Business?“ in CIRE Magazine delves into the topic of companies looking outside of primary markets such as New York City, Los Angeles and Chicago. Instead, companies are targeting secondary cities for relocation and expansion where they can find great office space for reasonable prices. Nashville is benefitting from this trend as one of the most attractive secondary cities. Additionally, it was recently announced by MarketStreet Enterprises that they plan to develop office buildings in the Gulch area that will add 1.5 million square feet of office space to the market. As companies take advantage of the current market and new office space becomes available, the issue of parking and public transportation, especially in the Downtown submarket, will become major factors in bringing business to Nashville.
Absorption continues to be positive at 105,707 square feet, making the year-to-date absorption 285,561 square feet. This is significantly lower than the third quarter number in 2010. With such a slow start to this year, it’s bound to take some time to fully recover.
MARKET INDICATORS
3Q 2011 | OFFICE
Nashville Office MarketSummary of Statistics, Q3 2011
Vacancy Rate: 11.0%
Absorption: 105,707 SF
Under Construction: 320,820 SF
Asking Rents Per Square Feet:Class A: $22.40Class B: $17.21Class C: $14.86Overall Rental Rates: $19.78
Downtown Class A: $22.30Suburban Class A: $23.33
Quarterly Comparisons and Totals
QUARTER BLDGSTOTAL
INVENTORY SF
DIRECT VACANT
DIRECT VACANCY
RATE
SUBLEASE VACANCY
RATE
NET ABSORPTION
CURRENT QTR
NET ABSORPTION
YTD SF
UNDER CONSTRUCTION
SF
AVG ASKING RATE
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
Q3.10 380 31,003,721 3,739,721 12.1% 2.1% 167,858 501,370 101,510 $20.10
Updated 7-2011
Vacancy rates have steadily been declining over the past year. The current quarter rate is 11%, a decrease of 1.1% since last year. Low vacancy rates suggest that negotiating leverage will swing back in favor of the landlord.
As vacancy decreases and tenant demand increases, rental rates have started to rise. Though still lower than the third quarter of 2010, it has increased $1.73 since last quarter. The highest rental rates continue to be found in the Green Hills and Music Row areas.
Some new leases were negotiated this past quarter. HCA subsidiary Parallon Business Solutions announced a new lease at Eight Corporate Centre in Cool Springs for an 83,000 square-foot space.
Tractor Supply company leased a 66,085 square-foot space in Westwood South in addition to their corporate headquarters in Brentwood. Correct Care Solutions signed a new lease for a 47,352 square-foot space in Airways Plaza. LifePoint has recently executed a lease for 200,000 square feet in Brentwood.
In addition to these leases, several office buildings are currently under construction. The Trolley Barns at Rolling Mill Hill had its official ground breaking ceremony and announced the Entrepreneur Center as a future tenant. Boyle Investment Company broke ground on the final phase of the Meridian Cool Springs office development. It will be a seven-story, 175,000 square-foot Class A office building that is expected to be completed by the end of 2012.
Class A Class B Class C
-60000
-30000
0
30000
60000
90000
120000
150000
Wes
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Airp
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Airp
ort S
outh
Bren
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Cool
Spr
ings
/Fra
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Dow
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Gree
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ills/
Mus
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Met
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Rive
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3Q 2011 | Vacancy Space By Type
Class A 1,312,423 SF
Class B 1,623,067 SF
Class C 464,351 SF
3Q 2011 | Net Absorption By Submarket
RECENT SALES TRANSACTIONSSALES ACTIVITY
PROPERTY BUYER SALE PRICE SIZE SF SUBMARKET
Nine Corporate Centre JP Morgan $42,000,000 155,919 Cool Springs
9010 Overlook Boulevard Franklin Land Associates LLC $2,300,000 36,000 Brentwood
110 Westwood Place Universal Health Services $2,900,000 24,075 Brentwood
RECENT LEASING TRANSACTIONSLEASING ACTIVITY
PROPERTY TENANT SIZE SF TYPE SUBMARKET
Eight Corporate Centre Parallon Business Solutions 83,000 New Cool Springs
Westwood South Tractor Supply Company 66,085 New Brentwood
Airways Plaza Correct Care Solutions 47,352 New Airport South
Nine Corporate Centre Healthcare Management Systems 32,888 New Cool Springs
Aspen Corporate Centre 400 Peak 10 26,356 Expansion Cool Springs
DEFINITIONS
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.
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.
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.
Class C Building - Buildings competing for tenants requiring functional space at rents below the average for the area.
Total Building SF - All single & multi tenant office buildings above 20,000 SF excluding medical, government and owner occupied.
Vacancy Rate - Percentage rate of the total amount of physically vacant space divided by the total amount of existing inventory.
Bold text denotes Colliers International Nashville transactions.
P. 2 | COLLIERS INTERNATIONAL
MARKET REPORT | Q3 2011 | OFFICE | NASHVILLE
UPDATE Market Comparisons
OFFICE MARKET
CLASS BLDGS TOTALINVENTORY
SF
DIRECTVACANT
SF
DIRECTVACANCY
RATE
SUBLEASEVACANCY
RATE
VACANCY RATE PRIOR QTR
NET ABSORPTION
CURRENTQTR SF
NET ABSORPTION
YTDSF
UNDER CONSTRUCTION
SF
AVG ASKING RATE
AIRPORT NORTH
A 10 1,913,290 127,578 6.7% 4.4% 6.7% 237 5,965 0 $19.63
B 23 1,704,947 244,418 14.3% 0.0% 14.0% (26,867) (19,786) 0 $16.00
TOTAL 33 3,618,237 371,996 10.3% 2.3% 10.1% (26,630) (13,821) 0 $18.14
AIRPORT SOUTH
A 8 565,231 0 0.0% 4.0% 0.0% 0 4,471 0 $19.50
B 17 1,423,036 196,189 13.8% 2.7% 17.10% 46,963 60,423 0 $14.72
C 31 864,449 267,977 31.0% 0.8% 31.1% 500 (79) 0 $12.87
TOTAL 56 2,852,716 464,166 16.3% 2.4% 17.9% 47,463 64,815 0 $14.19
BRENTWOOD
A 28 2,464,234 87,451 3.5% 1.1% 6.1% 66,322 100,441 0 $22.36
B 43 2,242,704 155,652 6.9% 0.8% 8.0% 40,004 45,853 22,700 $19.58
C 3 95,160 2,300 2.4% 0.0% 2.4% 0 0 0 $16.00
TOTAL 74 4,802,098 245,403 5.1% 1.0% 6.9% 106,326 146,294 22,700 $20.65
COOL SPRINGS/FRANKLIN
A 30 3,899,447 310,322 8.05 1.3% 8.6% 22,924 56,247 175,000 $22.95
B 23 1,036,647 66,504 6.4% 3.7% 6.6% (2,150) (9,029) 18,120 $17.28
TOTAL 53 4,936,094 376,868 7.6% 1.8% 8.2% 20,774 47,218 193,120 $22.25
DOWNTOWN
A 11 3,844,729 637,658 16.6% 6.7% 17.0% 9,172 55,305 0 $22.30
B 37 3,369,509 795,861 23.6% 0.3% 23.2% (23,063) 20,220 90,000 $16.81
C 9 369,375 27,585 7.5% 0.7% 9.1% 6,200 9,535 0 $16.89
TOTAL 57 7,583,613 1,461,104 19.3% 3.6% 19.4% (7,691) 85,060 90,000 $19.63
GREEN HILLS/MUSIC ROW
A 8 962,539 14,074 1.5% 0.0% 1.5% 0 15,801 0 $27.72
B 21 731,037 57,499 7.9% 0.2% 6.8% (1,142) (4,454) 26,600 $20.99
C 13 366,039 25,333 6.9% 0.0% 8.4% 5,557 17,543 0 $21.66
TOTAL 42 2,059,615 96,906 4.7% 0.07% 4.6% 4,415 28,890 26,600 $24.58
METROCENTER
A 4 476,974 5,323 1.1% 0.0% 1.1% 0 3,000 0 $17.40
B 5 525,862 54,029 10.3% 2.9% 9.9% (803) (3,954) 0 $16.12
C 5 435,927 27,912 6.4% 0.0% 6.6% 0 0 0 $14.10
TOTAL 14 1,437,763 87,264 6.1% 1.1% 6.0% (803) (954) 0 $15.99
RIVERGATE/NORTH
A 4 204,680 21,945 10.7% 0.0% 9.8% 0 (200) 0 $19.02
B 3 81,952 10,950 1.4% 0.0% 13.4% 0 0 15,000 $14.50
C 8 187,405 46,204 24.7% 0.0% 15.6% (6,890) (16,786) 0 $13.37
TOTAL 15 474,037 79,099 16.7% 0.0% 12.6% (6,890) (16,986) 15,000 $16.55
WEST END/BELLE MEADE
A 13 2,292,172 108,172 4.7% 4.0% 3.1% (32,043) (51,295) 0 $26.11
B 16 718,265 41,965 5.8% 0.0% 5.4% (3,500) (3,640) 0 $18.96
C 7 265,149 67,040 25.3% 0.0% 26.5% 4,286 (20) 0 $17.06
TOTAL 36 3,275,586 217,077 6.6% 2.8% 5.5% (31,257) (54,955) 0 $23.45
NASHVILLE MARKET TOTAL
A 116 16,623,296 1,312,423 7.9% 3.2% 8.3% 66,612 189,735 175,000 $22.40
B 188 11,832,959 1,623,067 13.7% 1.0% 14.1% 29,442 85,633 145,820 $17.21
C 76 2,583,504 464,351 18.0% 0.4% 18.0% 9,653 10,193 0 $14.86
TOTAL 380 31,039,759 3,399,841 11.0% 2.2% 11.3% 105,707 285,561 320,820 $19.78
MARKET REPORT | Q3 2011 | OFFICE | NASHVILLE
COLLIERS INTERNATIONAL | P. 3
UNITED STATES:
NashvilleNate GreeneManaging Partner300 BroadwayNashville, TN, 37201TEL +1 615 850 2729FAX +1 615 850 3229
RESEARCHER:
NashvilleAllison SchepmanMarketing Director300 BroadwayNashville, TN, 37201TEL +1 615 850 2748FAX +1 615 244 2957
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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.
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Office/Investment
Nate Greene, CCIMDIR +1 615 850 2729
Office/InvestmentManaging Partner
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Office/InvestmentPrincipal
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Office/Investment
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Office/Investment
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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.
BRENTWOOD
GREEN HILLSMUSIC ROW100 OAKS
COOL SPRINGS/FRANKLIN
WEST END
RUTHERFORD COUNTY
WILSONCOUNTY
RIVERGATE/HENDERSONVILLE
NORTHWEST
CENTRAL BUSINESS DISTRICT
AIRPORTSOUTH
AIRPORTNORTH
DOWNTOWNMETRO CENTER
Gallatin Rd.
Leba
non P
l.
West E
nd A
ve.
Harding Pl.
O ld Hickory Blvd.
Fran
klin
Moores Ln.
Murfreesboro Rd.
Nolensville Rd.
Done
lson
Pike
Briley
Pkwy.
Bell Rd
.
Woodmont Blvd.
MARKET REPORT | Q3 2011 | OFFICE | NASHVILLE