Key Take Aways from October 2023 Meeting!
Bond Oman (Oman-Gibson Associates): Bond is a medical real estate developer and he also acquires property. They have completed projects in 35 states. Currently, they have projects going on in five or six states, including Texas, California, and Tennessee. The difference in medical projects and most other projects is that medical projects may take 18 to 24 months to complete. His projects are with hospitals or physician groups, including MOBs. COVID put things on hold, especially on the healthcare side because of staffing, but the higher interest rates are tough. Costs are not going down. Labor is still an issue. Now, based on what he is hearing and seeing, he doesn’t see things getting better until first quarter of 2026. There is still a disconnect on the investment side with buyers and sellers.
Jim Murphy (Bradley Arant Boult Cummings): Jim does a lot of land use, incentive, and entitlement work. His incentive work had been busy. He has several projects in Middle Tennessee where smaller communities are stepping up and incentivizing trying to get people to come to their communities. He has other projects that are getting to entitlement and then waiting and not breaking ground. He has some multi-family and mix use projects that are going, but others are waiting until the market conditions get better or figuring out a way to restructure their deals. He is staying busy but the backup work is starting to look questionable.
Lee Hunter (CapStar Bank): Lee runs CapStar Bank Commercial Lending Group. He said they are getting payoffs but they are not really making new loans. They are in a pause. Banks are trying to stay smart with their liquidity. They have been handling renewals of existing loans. He feels that liquidity is king. He said it is extremely rare when a borrower is putting in more equity than the bank. Today, many of the banks are requiring you to have 20 to 50% of the loan in deposits in their bank. He mentioned that the 1031 exchanges this year versus last year are way down. He feels that the strong will survive and thrive. He feels that we are seeing the tip of the iceberg as far as problems are concerned.
Travis Groth (Maury County Chamber and Economic Alliance): Travis decided to tease this month since he will be speaking next month. He said that Maury County is a fast-growing community that is seeing development across all real estate types. He is looking forward to sharing a little bit about why this is the case and why you should probably be interested if you are looking for your next market opportunity in the greater Nashville area.
Kelly Cochran (State of Tennessee Real Asset Management (STREAM)): Kelly said that the State recently broke ground on the military and law enforcement training project across the river by the prison. She did ask if they plan to put in another bridge to access the other side of the river. They will not add a bridge. She did mention with the Blue Oval Project the taxes will double and triple in the county just to build the infrastructure that will be needed for the additional people that will be moving to the county. The cost of the land and development is going up. The State is about to revise their TI standards for leasing and next year she will track and be able to comment on how much the increase standards will affect the rental rates.
Steven Culp (W. E. O’Neill): Steven is a Director of Business Development with W.E. O’Neil. Their typical lead market is multi-family, schools, churches, government buildings and retail. Multi-family is slowing down and is at a 10-year low for pulling multi-family permits. It is a perfect storm of liquidity, interest rates, and high construction costs. The biggest problem that he is hearing from the developers that he works with is the absorption of the units that are currently on the market. It will probably take 1.5 – 2 years for them to be absorbed. Their growth rate has not slowed down. Good news is that the school market has taken off.
Robby Davis (Stream Realty – Nashville): Robby does office leasing and sales. He sees the boots on the ground of companies looking in Nashville or relocated in Nashville. He is not seeing the new to market tenants. He is mostly seeing companies that came during COVID and took a temporary spot and are now in the market looking for their permanent spot because they have a handle on what their footprints should be. The new construction assets are still performing. He is seeing a balance of people that came during COVID and need permanent space now or tenants in the market that have leases expiring and are ready to jump into a newer and nicer building. He said that Brentwood has the tightest submarket right now with 7% vacancy, then Cool Springs is about 18% vacancy. He said “walkability” is what people want now.
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