Monday, March 10, 2008
Demand grows for office space in airport area
Location, price help reel in new tenants By CHAS SISK • Staff Writer (Tennessean) • March 10, 2008 The construction firm Balfour Beatty faced an unusual situation last year. Its Nashville office was out of space, and for the first time in the company's decade-long tenure in the Lakeview Ridge office park on Elm Hill Pike, there was no room to expand. "This building pretty soon is going to have 100 percent occupancy," said Edward J. Hernandez, a senior executive in Balfour's Nashville office. Such situations are cropping up in many office buildings clustered around Nashville International Airport. Long the weakest area for office leasing in the Nashville area, the airport submarket has seen some improvement lately. Vacancies are down and rents are up. A half-dozen major office leases have been signed in the past six months. Companies have renewed leases that were about to end, while others are moving into better quarters in the area. Balfour Beatty is one such company. The British construction firm has three divisions in Nashville: the construction management firm, Balfour Beatty Construction; the medical equipment planning and technology group, Balfour Resource Group; and the health-care program management and development firm, Balfour Concord. All three businesses have expanded to the point that they have outgrown the 8,600 square feet of office space they now occupy. Next month, they'll move into nearly twice as much space in the nearby Highland Ridge Tower. "We thought about the Demonbreun corridor or the downtown corridor," said Hernandez, who leads Balfour Resource Group. "But this made the most sense." Other recent deals in the area include Kroll Background America's deal to lease 86,000 square feet; ServiceSource International Inc.'s deal for 20,000 square feet; and the state of Tennessee's deal for 14,000 square feet. These have helped push the area's vacancy rate down from about 20 percent in 2005 to 15 percent at the end of last year. Meanwhile, the average rent for upscale office space has risen from about $15 a square foot to $16.50 today. The area seems to attract regional offices for companies with headquarters elsewhere, said Whit McCrary, a principal with Colliers Turley Martin Tucker, which brokered Balfour Beatty's new lease. "When you have a company that is locally based, their decision-makers live in Brentwood or Cool Springs so they want their offices there," McCrary said. But decision-makers of companies that pick space near the airport "are not necessarily around locally," and the airport sometimes makes sense because it's easy access for executives who fly in and out of town to their company's Nashville office. Site eases commute The airport office market's central location is another factor, real estate professionals said. Office workers who live in Wilson, Sumner and many parts of Davidson counties have a shorter commute to the airport than to suburban office parks in Williamson County. Finally, rents are cheaper at the airport. In Green Hills, landlords are asking $24.50 to $28 a square foot, according to Colliers Turley. On West End Avenue, they're asking $22.50 to $28.50. In Cool Springs, they're asking $19 to $24. By comparison, asking rents at the airport are $16.50 to $21 in buildings north of Interstate 40 and $16.50 to $18 in buildings south of the interstate.
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