Key Take Aways from March 2023 Meeting!
Jim Murphy (Bradley Arant): Jim said that we will see something more over the next couple of weeks over the fight with the Metro and the State over the Counsel. Metro has filed suit challenging the constitutionality of the legislation. That requires a 3-judge panel to be appointed by the Supreme Court. They are trying to get an expedited hearing because legislation requires the redistricting of the Counsel Districts on a very short timeline. We will see if we will have 20-member (from 40 member) counsel elected this year or will it be delayed.
Brooks Smith (Bradley Arant): He has really seen a decline because of financing he feels that seller’s still have a high opinion of what they want to receive. He is doing a lot of leases and seeing a lot of activity in Nashville. He said about half of people with leases are moving around and rents are going up. Also, he is noticing that a lot of people are still coming from out of town, but others are moving from B-Class to A-Class buildings. It was mentioned that vacancies are 3.3% for retail and 11.6% for office.
Lee Hunter (CapStar Bank): Lee began by talking about the second largest bank failure with Silicon Valley Bank and the third largest bank failure with Signature Bank. He said they were too heavily invested in treasury bonds and big into crypto. These banks had large depositors where over 90% of their deposits were over the $250,000 limit. He feels that over time it will show that these were outliers as they are not typical commercial banks that have a granular customer base with loans and deposits. Lee noted that this failure was fueled by social media posting where people were able to move over $40B in 24 hours. He also felt with President Biden covering this failure, it calmed things down but as a result of this failure, banks will have to pay more into the funds.
Casey Estanislao (Hastings Architecture): She has not seen many projects being put on pause, although she feels like she is still holding her breath waiting for things to drop. She is noticing projects that are currently under construction may be in a different place if they had not received funding. Projects that are currently in design are being priced higher than anticipated where in some cases it is 20% and as high at 40% higher, which is causing people to pause but it isn’t stopping completely. She has a lot of clients that have private equities and/or REITs so banks are not stopping their projects, but she said she will be cautiously optimistic for the rest of the year.
Barry Greer (RK Junior): Barry is still waiting on banks to open up lending, although private equity is picking up the slack. He is seeing more developers reaching out for partnerships in developments. He said that inventory is strong, but the pricing is slightly above the point when we were booming. He feels that the market is strong.
Chris Green (Terracon): Chris is seeing an uptick in Phase I projects. He is looking at this as there is money moving. Some of the big names that are coming to town are Wawa, In-N-Out Burger, Raising Cane’s and Whataburger. Older properties are beginning to move. Business has leveled out in comparison to what it had been. Seeing a lot of solar and battery charging stations projects. As a company, they are trying to figure out the logistics of their office space as they have run out of space.
Steven Culp (W. E. O’Neil Construction Co.): Steven cannot say that he is seeing a lot of change. It is steady. What has slowed down are the smaller multi-family projects but municipal projects are still coming. There is a lot of opportunity from the bank side, i.e. rental of existing branches or new branches. He has heard that the local developers are experiencing a little frustration regarding the speed with how they get things done in Nashville. Some developers are even looking into Chattanooga mainly because of their frustration in Nashville. There is still a supply of work and people are still coming to town.
Diana Johnson-O’Brien (CBRE | Southeast Research): Things are still status quo and not much has changed over the last month. There is a lot of talk about the Southeast and Nashville being in high demand and companies want to expand into the market. Developers are looking to expand in the Southeast within the next 24-36 months. She is seeing rent growth. In construction, she is seeing that developers are more cautious and they are pressing pause.
Dan LeVan (Fisher Bay): Fisher Bay is located in Chattanooga, TN. His background is being a CEO for a $15B bank in the Caribbean and a CFO in Russia but his home is in Chattanooga. He feels that Chattanooga is a quiet place that is ready for a reawakening. Fisher Bay is investing their money in Chattanooga. They are buying unfavorable mixed-use assets and turning them into favorable assets. They have converted office space into condos, purchased a building to create a mixed-use downtown. They had a quiet open house where 40 attended, 30 of the attendees were from Nashville. This is letting him know that people want to invest in Chattanooga. They are quietly buying up mariners as well.
Travis Groth (Maury County Chamber and Economic Alliance): Travis works in Economic Development in Maury County and he encourages people to visit Maury County. They are really growing. He is seeing speculative and industrial production. He is seeing big projects in Spring Hill. There is a significant amount of residential, single-family, and mixed, being developed as well. He feels that they will need additional schools based on their growth as they move forward.
Michael Dunn (CBRE): Michael is a Land Broker with CBRE and he is seeing a little of everything, retail, multi-family and industrial. He has noticed that the downtown projects are getting hard to finance, the concrete prices are high. He feels that we are flipping from a seller to a buyer market. He is noticing that if your give the runway, they can make a project work. It is just taking a little longer. He is experiencing a lot of hand-holding and extensions on projects. He suggested if you extend for free the first time, charge for the next time(s).
Will Dunn (CBRE): Will is a Land Broker/Auto Broker at CBRE. He is not seeing a slowdown although there is a level of pause. He is seeing an increase demand by cash buyers. He said that retail have stayed strong and is not slowing down. He’s seeing restaurant, grocery stores, service (convenience and retain medical (vets) are strong as ever on retail projects. On the auto side, he is noticing that the car inventory is up, but lower than 2021, but higher than 2022. He is dealing with multiple groups looking to expand. They are coming to Nashville, not just for stores but for hubs where they are bringing their sales, service, detail, etc. Some auto groups are looking to expand and others are looking to enter. He said that Tennessee is becoming dominant in the auto world.
Stephen Brink (First Southern Mortgage Corp.): He felt the recent banking crisis was a singular incident where it was poor management of liability/asset matching. We may see more failures depending on how the Feds will increase rates. He said that life insurance lenders have plenty of money and their allocations are larger than they were in 2022. He mentioned that Fannie May and Freddie Mac was just awarded $75B each. So, there is money there to finance multi-family projects.
Emily Dicks (Sagemont): Emily is with Sagemont and they are a full-service brokerage firm but she primarily does tenant representation, office retail and medical. On the retail side they are feeling the tightening of vacancy rates. It is at a low 3% rate. She mentioned that Nolensville, TN hardly has any inventory. There has been an interest from small businesses or businesses coming to Nashville. This is more than she has seen over the years. She read in an article that Nashville is leading the way in bringing employees back to work 5 days a week. People are even looking at moving to different parts of town.
Kelly Cochran (State of Tennessee Real Asset Management (STREAM)): Leases office space for 26 governmental agencies. She does lease proposals requests so she can negotiate with people. These leases are hot because they have a 90-day termination for convenience. Basically, they are asking people to deliver turnkey space with a 90-day lease. She is on the procurement side and most things that she works on are in rural West Tennessee. If anyone has clients that are interested in doing business with the State, please check out their website:
https://www.tn.gov/generalservices/real-estate-/redirect-stream/about-stream.html
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