Writer: Chérie Lynn Canada
2 min read February 2024 — Nashville’s office sector, while still facing high vacancies, continues to offer potential for those looking to capitalize and reinvent the space.
Optimizing office spaces and increasing amenities are ways construction leaders are looking to revitalize a sector that has become less than optimal for some tenants. How they go about that remains a question to resolve.
“In the office space sector, there’s a clear divide,” Jason Holwerda, partner and market leader at Foundry Commercial, told Invest:. “On one end, well-located, class-A office seems to be thriving, while on the other, some offices have become obsolete and need to be rethought. The common solution I keep hearing is converting these spaces into residential or multifamily apartments; however, this only suits a small number of buildings. Other viable options include redevelopment into retail, mixed-use, or industrial spaces. Another trend is reimagining office functionality, moving beyond just adding amenities or tenant lounges. This is where we are focusing most of our efforts.”
Music City saw an office vacancy of 21.1% in Q4 2023 according to JLL’s Nashville Office Insight Report released in January, trending to be the highest vacancy in the last decade. However, empty office spaces did not stop the cranes from going into the sky. Nashville has one of the fastest-growing construction pipelines in the nation, but a slowdown in new construction could be on the horizon, according to forecasts.
FMI Corp’s construction put-in-place forecast, referring to the estimated dollar value of construction work done in the U.S., predicts a 4.6% rise in the dollar value of total construction in 2023 and a marginal dip of 0.2% in 2024. This is expected to lead to a decline of 8.9% in commercial work in 2024, said Jay Bowman, who leads FMI’s Research and Analytics Practice, as cited by Engineering News-Record.
“The reduced demand for large-scale projects translates to fewer new office starts and a decrease in the initiation of new buildings, providing a benefit for existing property owners like us,” Alex Chambers, senior vice president and Nashville market leader at Highwoods Properties, told Invest:.
“In our office buildings, we’re actively enhancing the environment by introducing amenities. This includes creating food opportunities, fostering collaboration, and providing outdoor spaces such as parks and fitness areas,” he added.
The landscape of the commercial real estate sector in Middle Tennessee continues to evolve. With new mixed-use developments wrapping up, such as Ashwood 12 South, Peabody Union, and Society Nashville, some leaders in the region continue to focus on conversion, redevelopment, and reimagining the numerous empty office spaces that are impacting the economy.
