Crescent Resources’ One Greenway Centre will open soon and add to the oversupply in the once-hot Cool Springs market. Here is the story reported by Matthew Williams with the The City Paper:
“Since the early ’90s, Cool Springs has produced a continuous stream of office and retail developments clamoring to serve some of the country’s wealthiest ZIP codes. But today, even Nashville’s high-end suburban haven is showing signs of stress.
On the office front, businesses aren’t as eager and able for a Cool Springs address as they once were, despite an abundant supply of space. According to figures from Grubb & Ellis|Centennial, more than 650,000 square feet sat vacant in the Cool Springs office market at the end of the third quarter, with an additional 682,002 square feet under construction.
Both Highwoods Properties and Boyle Investments have recently brought buildings to market and more inventory is on the way in the spring. Crescent Resources plans to soon open the 164,000-square-foot One Greenway Centre and Southern Land is nearing the completion of its 173,000-square-foot McEwen Building. The question then is whether or not tenants will be willing to sign on.
“There will be a jump in vacancy, simply because they have so much product coming online and they got caught at the wrong time,” said Lee Paradise, a broker at NAI Nashville. “The Cool Springs market will continue to be strong. It’s just going to take some time to absorb that.”
Until companies’ confidence returns, some plush corporate space — built when materials prices were at their highest in years — might sit empty. Prospective tenants are timid to move in a down economy, instead favoring shorter-term leases in their existing locations when it’s time to re-sign.
Crescent has secured no pre-leasing yet for One Greenway Centre, said Patrick Emery, a senior vice president at the firm. “We’ve got prospects we’re working on right now, but we’ve had to put some on hold,” he said.
At nearby Cool Springs IV, Highwoods has landed tenants for around 10 percent of the space, said Brian Reames, the firm’s senior vice president.
“We’re concerned, but we’re not worried,” he said. “We budgeted a healthy lease-up period after the building opened, but we’re not hitting those targets. It’s just going to be a timing issue.”
An undercurrent of subleasing also has frustrated owners’ efforts to fill up new property. Instead of making the expensive jump to Cool Springs, some companies have opted to take on space other companies are looking to get rid of. The Maryland Farms/Brentwood area has seen a particular surge in subleasing.
“In the last 12 weeks or so, there’s been 15 or 20 [subleasing offers] that have come out,” said NAI’s Paradise. “Eight or 10 months ago, if you wanted to sublease a 2,000- or 3,000-square-foot space, you had only one space to look at.”
If Cool Springs building owners struggle to snare tenants for a lot of their available space, they will likely be forced to open their wallets for companies that once considered the submarket out of their range — although it’s not likely to mean lower rents.
“In the near term, prices will only slightly be affected. However, I would expect concessions to become more plentiful in the way of free rent and build-out dollars,” said Tim Stowell, president of tenant representation firm Corporate Real Estate Advisors. “The longer the recession lingers, the more likely there will be downward pressure on rental rates.”