Key Take Aways from May 2023 Meeting!
Kelly Cochran (State of Tennessee Real Asset Management (STREAM)): She feels that things are slowing down a bit. She mentioned that CBRE will broker the James Polk building. Although the State will move out of the building (and Citizens Plaza), they will probably do a ground lease to maintain control. She feels this will have an impact on the downtown landscape. She said the State is compressing their footprint in the downtown area and if they can work from home, they are.
Barry Greer (RK Junior): He is seeing builders getting rid of packaged deals and he has been able to scoop them up. All of their projects have been funded with private funds, except for one. He has noticed that permits/codes are moving quicker. He is also seeing the market pick up.
Jim Murphy (Bradley Arant): Jim said that most office space deals are moving forward. He is seeing that the multi-family developments are going hot and heavy, but he is not seeing as many new deals and they are slowing down and being re-evaluated. For him, things are still pretty busy as people are still coming to Nashville. He is also noticing that developers are deferring as opposed to cancelling transactions. They are maximizing what they currently have.
Casey Estanislao (Hastings Architecture): She is noticing office slowdown, but multi-family is good. She is really enjoying paying attention to both the TBR/STREAM on the release of nearly $1 billion of work in Tennessee. She is focused on East Bank and waiting to see how long the project will take. She mentioned there is a public RFQ for program management and a developer RFQ for nearly 30 acres around the new stadium. She feels that the developer RFQ will close before the new mayoral administration is in place.
Lee Hunter (CapStar): He talked about the interest rate increase and the bank failures in the news. He is now finding himself reviewing portfolios, deposit gathering, and maturing loans these days. He is seeing the new 5-year deals, if they are fixed, coming in at the 6% range. He predicts it will be a strange in the remaining 2023 and he is trying to stay relevant. He is seeing people taking a break for now.
Bond Oman (Oman-Gibson): He is having several projects restarting in the Nashville area from Vanderbilt to Bellevue. He is seeing big projects outside of Nashville. They are teaming up with a national REIT and will be starting a project in Dallas for surgery centers. He feels there is a big disconnect between sellers and buyers right now.
Steven Culp (W. E. O’Neill): He continues to see out-of-state developers being interested in Nashville. Also, they are interested in the outside core (Antioch, Donelson, Lebanon, the 109 corridor) and are much more cautious than they used to be. He mentioned, for contractors, engineers, and architects, there are over 100 projects available with TBR and STREAM.
Jan Freitag (CoStar Group): He said that hotels are forecasting up because consumers will continue to travel. National brands are introducing brands that are much lower on the totem pole. Hilton has introduced Spark, which is a franchise only property type that are only for conversions. Marriott will mention a lower end extended stay property any day now. He mentioned that big brand hotels are going low end and including condos. Also, he is seeing lots of construction in Nashville and Austin.
Susan Felts (First American Title): Based in Nashville but works on property all over the country. Said has seen that they have gone from a sprint to a jog and she is cautiously optimistic that we are still jogging. She is seeing orders deferred, some cancelling, but they are opening orders all the time and they are staying steady. She is not seeing as many office projects but more medical projects. They tightened up on mechanical liens in the last recession. After that recession, the mechanics lien underwriting did swing heavily and they brought it back a bit so that it isn’t that bad but she hasn’t seen it swing the other way again. She is finding that it is getting easier internally to get through some hoops and paperwork.
Gino Tabbi (Newmark): Focuses on investment sales and he tracks a lot of the government support tenants nationwide. This is a very insulated market. He feels that there is a major disconnect in cap rates, more buyer/seller expectation. He has seen a lot of private capital coming into the market recently. He is seeing less velocity in space. When it comes to private vs. government space, he’s seeing a major consolidation. He is seeing nationwide that there is about 20% of state workers back in the office full time. He is subleasing space for industrial projects and it is getting very difficult for him to find needed space. He says this is a tight market.
Floyd Shechter (SmartSpace): Donelson was not hip when Floyd started investing there in 1998 but he was one of the five founders of the non-profit organization called Hip Donelson. He has been through five recessions in his career. Each time, he has come out stronger as an industry than we were before the recession. He feels perspective is important in life. He works a lot with Class B properties and feels that there will be a 30% of his contraction where buildings will just go away. The zoning is CA, commercial attraction. There is a commercial attraction and he feels that the key is to stay flexible. He has noticed that leasing is fragmented, but active. The demographics shows that 7 of 10 families move to the suburbs when they marry and start a family.
Rob Lowe (Stream Realty): They touch a lot of office, land, and investment sales. He has discretionary capital to go do deals. He said even though most of their employees are home, Asurion and Bridgestone buildings are not on the market because they are not going to let a smaller tenant into the building and disturb their security procedures. Nashville is not immune to what is going on in terms of interest rate environment, but it is significantly healthier than anywhere else. One of the trends that he is noticing is that smaller developers are being priced out of the market. He has had a couple of deals that have been at closing are being deferred because construction financing is at a pause. Hotel development is continuing to grow.
Robert “Bobby” Burns (SVN Robert H. Burns): Robert primarily does office leasing and investment sales. He is seeing activity pick up but it is not like it used to. It is still a big challenge with a lot of space in market because construction costs are extremely high. Smaller developers are having problems. He is still seeing people come in from out of town as they are not as affected by the rates as the local people are. He is optimistic. Nashville is a good city and there are great advantages in being here. He is noticing that subleasing is dicey, you have to be creative and have a sublandlord that is willing to look at the big picture long term as opposed to just today. It is a challenge to find the right fit because there are a lot of moving parts.
Jarrod Finger (WiSE Engineers): Jarrod said that WiSE is a little unique in that they are a structural engineering firm that works all over the U.S. They have projects in the Nashville and Middle Tennessee areas, as well as West and East Tennessee. WiSE does many types of projects – hospitality, retail, manufacturing, industrial, state, and federal work. Most of his work is privately funded. They work in all sectors, except full scale prisons and hospitals. They get a great cross section of occupancy types. He mentioned that retail is very strong all over the nation. They have retail projects that are nurturing other types of projects, like warehousing, industrial, general and grocery stores. He is seeing more development of outdoor malls or pseudo-outdoor malls as opposed to indoor enclosed malls. Contractors are engaging several developers to different projects in the area so they can have shared resources for those projects. He did mention that there is a little slowing down on how projects are being processed.
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